Alibaba, Yahoo end dispute over Alipay

Yahoo will get $2 billion to $6 billion if Chinese payment-processing company goes public

It looks like the war between Alibaba and Yahoo is over -- for now.

The two companies (along with Softbank on Yahoo's side) have settled a nasty dispute over the transfer of the Alipay payment system from Alibaba to a company run by Alibaba chief executive Jack Ma.

Yahoo, which owns about 40% of Alibaba, argued (and rightly so, in my opinion) that removal of Alipay hurt the value of its investment in Alibaba. The struggling U.S. Internet pioneer also complained that it had not been notified of the Alipay move until well after the fact. Like the opinions of Alibaba's largest shareholder don't even matter!

Fortunately, after seemingly endless negotiations (though really just since mid-May), the parties have announced an agreement.

Key terms:

* Alipay will continue offering preferential payment-processing services to Alibaba and its online auction site, Taobao

* Alibaba will receive 49.9% of Alipay's pretax income, as well as service fees and royalties from licensing software to the spun-off unit

* In the event of an initial public offering or "liquidity" event, Yahoo would receive between $2 billion and $6 billion.

The deal comes as a relief to Yahoo shareholders, who saw their stock fall nearly 10% when the furor erupted on May 11. Shares of Yahoo (NASDAQ: YHOO) were up as high as 57 cents, or 4.2 percent, to 14.07 in early trading Thursday.

And it certainly must come as a relief to Yahoo chief executive Carol Bartz, who is under fire for not producing tangible revenue results with her turnaround efforts. Not to mention she seems to have a rocky relationship with Ma. Now she can claim she protected the company's $1 billion investment in Alibaba.

'This is a good outcome for Yahoo! and for our shareholders, as well as all the parties to this agreement,” Bartz said in a statement.

She's right.

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