Yahoo sells half of Alibaba stake
The deal, announced in the US, will see Alibaba Group buying back the stake from Yahoo for 6.3 billion US dollars cash and up to 800 million US dollars of Alibaba preference shares.
Money from the sale might help Yahoo appease its shareholders by giving it the ability to pay dividends, make acquisitions or buy back its own shares.
The two companies also have an agreement for Yahoo to sell the remainder of its Alibaba stake in stages later on.
Yahoo's interim chief executive Ross Levinsohn said in a statement that the agreement provides "clarity" for Yahoo shareholders.
A person with knowledge of the deal said there are incentives built into the transaction that would make it attractive for Alibaba Group to hold an initial public offering by the end of 2015.