New York hedge fund Acacia Partners, a major shareholder in search engine Baidu, has requested the Chinese firm’s chairman Robin Li withdraw his bid to take online video site iQiyi private, claiming the proposed sale price was “far too low”. In an open letter to Li dated Monday, Acacia said: “We strongly believe the purchase by you of iQiyi is against the best long-term interest of Baidu and its shareholders.” And it accused Li of turning Baidu into “an extension of the pocketbook of one man”. If he were to proceed with the transaction, Acacia said the deal represented “inherent conflicts of interest”. Baidu ramped its investment in iQiyi from 5.1 per cent to 8.7 per cent of its revenue over the past year, and the letter described that as “a donation by Baidu’s shareholders to future iQiyi shareholders”. As an alternative it now suggests Baidu could spin off iQiyi through an IPO, maintain partial ownership, or do a rights issue allowing all Baidu shareholders to have a chance of benefiting from ownership in iQiyi on equal terms. Baidu announced in February it was selling iQiyi, China’s leading online video site, of which it owns 80.5 per cent of the diluted shares, to Li, valuing the business at US$2.8 billion. Acacia owns 2.6 million shares in Baidu, a stake worth more than US$400 million which is larger than the vast majority of Baidu’s other US institutional owners. It claimed in the letter that Li’s proposed purchase price was “far too low” compared with the valuation of the company and its rivals. Independent research group 86Research valued iQiyi at US$5.8 billion in a report in May, while iQiyi competitor Youku was acquired by Alibaba for US$4.8 billion late last year. Baidu’s investment in iQiyi accounted for 8.7 per cent of its 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. In the letter, Acacia said the short-term improvement to Baidu’s earnings produced by iQiyi’s sale would be trivial compared to the potential long-term value created for Baidu shareholders by owning iQiyi. Baidu said the company upholds the highest standards of corporate governance and has established a Special Committee made up of independent directors to evaluate the iQiyi transaction. “Baidu’s Special Committee continues to evaluate the proposed transaction and the Company will provide an update on the progress when a conclusion has been reached”, it said. iQiyi declined to comment on the issue.