Yahoo says it will sell about half of its stake in Alibaba, China's largest e-commerce provider, back to the Chinese company for $7.1 billion.

The two companies said Sunday that, under the agreement, Yahoo would get $6.3 billion in cash and approximately $800 million in Alibaba preferred stock.

Yahoo says it plans to return “substantially all” of the cash proceeds, after taxes, to its shareholders. The struggling U.S. Internet company has been negotiating on and off for least a year to sell a portion of its stake in Alibaba.

The complex deal sets the stage for Alibaba to file for an initial public offering.

Cashing out the Yahoo share of Alibaba had been part of a turnaround plan by recently ousted Yahoo chief executive Scott Thompson.

Thompson was forced out this month in the face of a controversy about his inflated resume.