Chinese e-commerce giant Alibaba Group bought back a 20% stake in the company held by Yahoo (YHOO.NASDAQ) for around US$7.1 billion in the run-up to a possible future initial public offering, Bloomberg reported. The ailing US search engine will receive US$6.3 billion in cash and around US$800 million in Alibaba preferred stock. During the IPO, Alibaba will either buy back a quarter of Yahoo’s stake or allow the company to freely sell its shares. “The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future,” said the company’s CEO Jack Ma in a statement. Yahoo acquired a 40% stake in Alibaba in 2005 for US$1 billion; at the time Yahoo’s market capitalization was around US$49.2 billion. Today the US tech company’s value has shrunk to US$18.8 billion, while the current deal values Alibaba at around US$35 billion.