(InfoWorld) - Yahoo Inc. plans to take a significant stake in China's Alibaba.com Corp. as part of a strategic partnership between the two companies, a company official said Thursday in Beijing.

As part of the deal, Yahoo will pay US$1 billion in cash for a 40 percent stake in its Chinese partner. In addition, Yahoo will transfer all of its Chinese businesses, which will continue to operate under the Yahoo brand, to Alibaba.

"This is Yahoo getting much bigger in China," said Daniel Rosensweig, the company's chief operating officer, speaking at a press conference in Beijing.

Based in Hangzhou, in eastern China, privately-owned Alibaba operates the Alibaba.com (http://www.alibaba.com) online marketplace and the Taobao.com (http://www.taobao.com) auction Web site, which competes with eBay's China auction site.

The deal gives Yahoo a 40 percent stake in the Chinese Internet company and 35 percent of its voting shares.

The agreement makes Yahoo the largest outside investor in Alibaba, the companies said. Previously, the largest investor in Alibaba had been Japan's Softbank BB.

Yahoo, in Sunnyvale, California, has struggled to establish a leading presence in China, where its best efforts have been unable to match the success of top Chinese portal operators such as Sina Corp. and Netease.com Inc. At the same time, many of Yahoo biggest competitors from overseas, such as eBay Inc. and Google Inc., have stepped up their investments in China during recent years.

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