Alibaba Group Holding Ltd reached an agreement on Friday with Yahoo! Inc and Softbank Corp, its largest shareholders, ending a four-month spat over how to compensate investors after an ownership change in China's most popular online-payment service.

Alibaba, which transferred the Alipay unit to a company controlled by Chairman Jack Ma last year, will get as much as $6 billion if Alipay sells shares to the public, according to a statement on July 29. Before any sale, Alibaba will receive 49.9 percent of Alipay's earnings.

The deal leaves Alibaba and, by extension, Yahoo and Softbank, with less access to the growth of the payments business. Yahoo's shares had lost almost 30 percent of their value in the past three months on concern that its future in the booming Chinese market was at risk. The United States company disclosed the loss of Alipay in May, saying it only learned about the August 2010 transfer in March.

"The market had feared that Yahoo would be diluted, and I guess that fear has been realized," said Clayton Moran, an analyst at Benchmark Co in Boca Raton, Florida, who has a "hold" rating on the stock.

Yahoo, based in Sunnyvale, California, fell 3 percent to $13.10 in New York trading on the Nasdaq Stock Market. Shares of Softbank fell 3.5 percent to 3,010 yen in Tokyo on Friday.

Alibaba will get at least $2 billion in the event of an initial public offering or "other liquidity event" at Alipay, according to the statement. Within the range of the agreement, the amount to be paid to Alibaba in such events will be calculated by multiplying Alipay's equity value by 37.5 percent.

Before the transfer, Alibaba owned 100 percent of Alipay and all of its profit, and the agreement reduced both the ownership and the share of earnings, Doug Anmuth, an analyst at JPMorgan & Chase, who rates Yahoo "neutral", said in a note.

"In addition, there is very little visibility into the exact timing of an IPO," he said.

Alipay will continue to offer payment services to Alibaba on preferential terms, the companies said in the statement. Alibaba will also license patents and technology to Alipay, for which Alipay will pay royalties.

'Marginally profitable'

The Alipay business is only "marginally profitable", Joseph Tsai, chief financial officer of Alibaba, said in a conference call on Friday. The announcement is the culmination of a series of constructive discussions between Alibaba Group Management, Yahoo and Softbank, he said.

Ma said earlier last month that Yahoo, Softbank and Alibaba would receive "very large" compensation for the loss of the unit, according to an interview with China Entrepreneur magazine. Investors grew impatient with Yahoo after it announced on May 10 the transfer of Alipay in a regulatory filing.

Greenlight Capital Inc, the hedge fund run by David Einhorn, sold its stake in Yahoo for a "modest loss" over doubts surrounding the value of the company's investment in Alibaba, the firm said in June. Greenlight had previously predicted that the China unit stake might be worth as much as Yahoo's entire market value.

Yahoo's main business, which Chief Executive Officer Carol Bartz has been trying to turn around for more than two years, is under pressure from rivals such as Facebook Inc, the world's most popular social-networking site. Yahoo is expected to cede its spot as the top seller of display advertising in the US to Facebook this year, according to research firm EMarketer Inc.

Yahoo's second-quarter results disappointed investors. Excluding sales passed on to partner sites, revenue was $1.08 billion, missing the $1.11 billion predicted by analysts, according to Bloomberg. Sales will be $1.05 billion to $1.1 billion in the current period, Yahoo said. That fell short of the $1.12 billion projected by analysts.

The new deal brings some closure to concerns about the Alibaba stake, said Ben Schachter, an analyst at Macquarie Capital in New York.

"It's great to have resolution and we can stop talking about it - and start talking more about the Yahoo business," said Schachter, who has a "neutral" rating on the stock. "But the reality of the Yahoo business is not something a lot of people want to talk about because it doesn't look good."