BUYOUTS

Alibaba pays US$3.67b to take over Youku Tudou

PUBLISHED : Monday, 09 November, 2015, 12:00am
UPDATED : Monday, 09 November, 2015, 12:00am

E-commerce powerhouse Alibaba Group Holding has agreed to pay US$3.67 billion for the shares that it does not own in Youku Tudou, the mainland's leading online video services provider, and take the New York-listed company private.

"We believe this combination with Alibaba maximises value for Youku Tudou shareholders and significantly benefits our customers, users and team," said Victor Koo Wing-cheung, the chairman and chief executive of Beijing-based Youku.

For Alibaba, the world's largest e-commerce services provider, taking over Youku formed part of its grand plan to become a leading competitor in the mainland's fast-growing digital entertainment market.

In a joint statement on Friday, the two companies said the all-cash transaction involved paying Youku US$27.60 per American depositary share, which represents 18 ordinary shares.

The acquisition cost represents a premium of 35.1 per cent to the stock's closing price on October 15, a day before Youku announced it had received a "going private" proposal from Hangzhou-based Alibaba.

Youku's board of directors unanimously approved the deal based on the recommendation of an independent special committee that reviewed the buyout proposal.

The board has, in turn, recommended Youku shareholders vote for the merger.

The transaction is expected to be completed in the first quarter of next year, following the customary conditions.

"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 [e-commerce] platform and Alipay services," Koo said.

Alibaba and Yunfeng Capital, a private equity firm co-founded by Alibaba executive chairman Jack Ma Yun, teamed up in May last year to buy 18.5 per cent of Youku for US$1.2 billion. Alibaba's current shareholding is 18.3 per cent.

In June, Alibaba announced a service called TBO - Tmall Box Office - on the mainland that is patterned after the United States' HBO and Netflix.

Alibaba did not say at the time how TBO would affect its ties with Youku.

TBO competes directly against the likes of Baidu-owned iQiyi, internet giant Tencent Holdings' eponymous Tencent Video, Sohu.com and Leshi Internet Information & Technology in the mainland's online video market.

Internet industry analyst firm iResearch has forecast the mainland's online video market to post total revenue worth 90 billion yuan by 2018, up from 23.97 billion yuan last year.

"With a fully consolidated stake, Alibaba will have deeper access to the Youku Tudou user base," Alicia Yap, the head of China internet research at Barclays, said in a report.

"Integrating e-commerce and media consumption data will help Alibaba to understand the user better, enabling it to provide a more targeted marketing service."

Youku has more than 500 million monthly unique visitors and 170 million daily visitors. It is also No 3 in China on mobile app user time spend, according to Barclays.

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