E-commerce giant Alibaba has tabled an offer to buyout the remainder of Youku Tudou, valuing the New York-listed Chinese video-hosting company at about $5.1 billion.
In a statement on Friday, the Hangzhou-based group said it made a non-binding cash offer of $26.60 per American Depositary Share for all the remaining shares in the Chinese YouTube-like service. Alibaba already owns an 18.3% stake in Youku Tudou, which it bought last year for $1.22 billion.
The offer price constitutes a 30% mark-up on Youku Tudou's $20.43 closing share price on Thursday, when the company had a market capitalisation of approximately $3.8 billion.
Best known for its e-commerce platforms – Taobao and Tmall – Alibaba has in recent years been expanding beyond its core business, aiming to become a major player in online content. Its latest bid for the remainder of Youku Tudou would be the group's second-largest transaction after its $4.7 billion acquisition in August of a 20.7% stake in electronics chain Suning, Dealogic data shows.
The proposal, still subject to the satisfactory completion of due diligence by Alibaba and the negotiation of a mutually acceptable and definitive merger agreement, has already won the support of Youku’s founding shareholders, including chairman and CEO Victor Koo. Under the proposal, Koo would continue to lead the business.
In a separate statement Youku Tudou said Alibaba intends to take it private following the acquisition.
“Unlike the other two internet giants [in China, Tencent and Baidu,] Alibaba doesn’t have its own video platform. It makes a lot of sense to buy out the remaining shares after the strategic investment,” one source with knowledge of the deal told FinanceAsia, adding that it could take a couple of months to complete the deal.
Youku Tudou, the country’s only US-listed video-streaming website, was created in 2012 when domestic rivals Youku and Tudou merged. Its current competitors include Tencent Video, part of Chinese social media giant Tencent, and iQIYI, a subsidiary of China’s dominant search engine Baidu.
Prior to the deal's announcement, Youku Tudou's share price had gained 15% year-to-date.