Baidu receives offer to take iQiyi private as buyers seek China IPO
The offer values iQiyi at US$2.8 billion
Chinese search engine Baidu has received a buyout offer for its 80.5 per cent stake in Chinese Internet video company iQiyi, as its buyers seek to bring the popular streaming company public.
The offer was made by Baidu chief executive Robin Li and iQiyi’s chief executive Gong Yu, and values iQiyi at US$2.8 billion.
iQiyi was first founded in 2010 by Baidu, and is the largest video streaming site in China. Its 10 million paid subscribers watch over 1.28 billion hours of content on its platform each month, according to the company.
“Over the last six years since iQiyi was founded, Baidu has provided indispensable support in funding and resources. iQiyi is now at the top of the Chinese Internet video industry,” said Gong in an internal memo to employees, Chinese media reported.
“After the privatisation, iQiyi will seek an appropriate time to go public in the domestic market,” he added.
Gong said that the privatisation offer stems from a need for increased financing capacity and development for iQiyi as the company seeks to gain a larger share of the Chinese Internet video market.
Baidu said in a statement that iQiyi will remain a “strategic partner” of the company if the deal goes through.
However, the search giant also cautioned its shareholders in a news statement, saying that “no decisions have been made with respect to Baidu’s response to the proposal”.
A special committee comprising of three independent directors has been formed to evaluate the deal.
iQiyi competes with rivals such as LeEco and Alibaba’s Tmall Box Office for market share in China’s increasingly crowded online video market as major players race to acquire exclusive content rights and woo audiences.
In October last year, iQiyi said that it would spend half of its 2016 budget producing over 40 new shows for paid subscribers. Currently, it shows a range of programmes from American TV shows such as Mad Men and Homeland to Chinese period dramas.
The company’s strategy mirrors that of California streaming company Netflix, which is known for producing hit series such as House of Cards and Orange Is The New Black. Netflix now serves over 74 million subscribers in over 190 countries including Hong Kong, although it is notably absent in China due to restrictions from the Chinese government.