E-commerce company Alibaba to buy “China’s YouTube” for $3.7 billion

A leading E-commerce company Alibaba agreed to buy Youku Tudou known as “China’s YouTube ” for about $3.7 billion, slightly more than it had offered in October.

The deal was announced on Friday will give the e-commerce giant access to more than half a billion online video users, accelerating its push into the Chinese digital media market.

It is also a vote of confidence in China’s economy by Alibaba Chairman Jack Ma, who has said investors should not overreact to his country’s slowing growth.
Youku Tudou’s American Depositary Shares rose 10 per cent to US$26.80 in premarket trading on Friday, below Alibaba’s offer of US$27.60 per ADS.

Alibaba held 18.3 per cent of Youku Tudou as of Oct. 16, when it made its initial offer of US$26.60 per ADS. The new offer values the rest of Youku Tudou at about US$4.8 billion.

The new offer represents a premium of 35.1 per cent over Youku Tudou’s closing price on Oct. 15.

Any deal would include the US$1.1 billion of cash held by Youku Tudou, Alibaba’s chief financial officer, Maggie Wu, said in October.

Based on this, Alibaba will end up paying about $3.7 billion under its revised offer.

Unprofitable Youku Todou needed the partnership with Alibaba, Summit Research analyst Henry Guo said.

Youku Tudou Chief Executive Victor Koo, a Bain & Co alumnus who owns about 18 per cent of Youku Tudou, will remain CEO of Youku Tudou after the deal closes in the first quarter of 2016.

Youku Tudou said: “We are eager to work with Alibaba to grow our multi-screen entertainment and media ecosystem. We are confident that we will strengthen our market position and further accelerate our growth through the integration of our advertising and consumer businesses with Alibaba’s platform and Alipay services.”