Baidu chief Li scraps plan to buy iQiyi
A buyer group led by Baidu CEO Robin Li withdraws the plan after failing to reach agreement on price, structure
Baidu’s Chairman Robin Li has dropped a US$2.8 billion bid to buy out the shares of the company’s video-streaming service Qiyi.com (iQiyi), after a major shareholder objected to his lowball offer, in a setback to his plan to spin off China’s top online video site.
Li and iQiyi’s Chief Executive Officer Yu Gong “had not been able to reach an agreement with Baidu on transaction structure and purchase price after rounds of discussions and negotiations”, Baidu said in a press release on Monday night.
Li and Yu proposed to buy 80.5 per cent of iQiyi in February, valuing the entire business at US$2.8 billion. That’s lower than the US$4.8 billion valuation for iQiyi’s competitor Youku Tuduo, owned by Alibaba Group Holding China’s top online video site by subscribers, iQiyi has more than 20 million subscribers paying for content as of June, and is valued at US$5.8 billion by Shanghai market-research firm 86Research.
In an open letter to Li last week, New York-based hedge fund Acacia Partners, which owns US$400 million in Baidu shares, said the proposed iQiyi sale “is an inherent conflict of interest” which could create the impression that Baidu was the “extension of the pocketbook of one man”.
Online video is an important vertical for Baidu, in which iQiyi remains a key strategic partner. The Chinese internet search operator has poured money from its main business into cash-burning operations, including online video. While investors pushed Baidu’s management to improve profitability in its video and on-demand business, many investors considered the buyout bid a “lowball offer”, Wall Street Journal reported on Monday.
Baidu’s investment in iQiyi accounted for 8.7 per cent of group revenue in the quarter ending in March, up from 5.1 per cent, 5.4 per cent and 5.9 per cent in the three previous quarters.
Still, Baidu said it will continue to support iQiyi in its continued growth and leadership in the industry.
“Online video is an important vertical for Baidu, in which iQiyi remains a key strategic partner. Baidu will continue to support iQiyi in its continued growth and leadership in the industry,” Baidu said in its press release.
Alibaba is the owner of the South China Morning Post.