ALIBABA Group yesterday said it has reached a compensation agreement with major shareholders Yahoo! Inc and Softbank Corp over the spinoff of Alipay.

Under the deal, Alibaba Group will receive at least US$2 billion and up to US$6 billion in the case of an initial public offering or "other liquidity event" at Alipay, the three parties said in a joint statement yesterday. The exact amount to be paid will be calculated by multiplying the total equity value of Alipay by 37.5 percent.

Yahoo and Softbank will indirectly benefit from an Alipay IPO as the companies collectively own about 70 percent of Alibaba. Both had been demanding compensation from Alibaba since the spinoff was disclosed.

The compensation plan values Alipay at between US$5.3 billion and US$16 billion.

Alipay will also pay 49.9 percent of its pre-tax income for software technology services before the share offering, which currently has no timetable.

Alibaba sold Alipay, China's most popular online payment service, to Zhejiang Alibaba E-commerce Co, a company controlled by Alibaba Chairman Jack Ma and Xie Shihuang, co-founder of Alibaba, for 330 million yuan (US$51 million) in August. Yahoo and Softbank said they were not notified of the transaction until March 31.

Ma later said the spinoff was necessary to comply with the People's Bank of China's licensing regulations over online payment operations for non-financial institutions.

Alipay handles an average of 2.6 billion yuan in transactions per day and has been expanding beyond offering payment services for Taobao, the online retailer under Alibaba Group.

Under the agreement, Alibaba, and by extension its shareholders, will continue to participate in Alipay's future financial performance, the companies said.