Alibaba stock price surged by 1.1% after Alibaba Group Holding Ltd. announced that it is acquiring Chinese video site – Youku Tudou for $3.6 billion. Earlier in 2014, Alibaba had purchased over 18% of Youku Tudou Inc. shares at a price of $30.50 per share. Alibaba is now buying the remaining 82% of the shares at the rate of $ 27.60 per share.
Youku is also known popularly as the Chinese YouTube and has a user base of 580 million. The move has been seen as an effort by billionaire Jack Ma to stream more content to the native Chinese Internet users by acquiring control of the YouTube-like site.
The total value of the deal is said to be worth $4.8 billion. It includes the 18% stake that Alibaba had purchased before. Alibaba had earlier quoted a price of $ 26.60 earlier. However, it raised it to $27.60 in cash. The latest price is 35% more than the Youku’s stock price the day before the initial bid was disclosed.
Youku’s Board has already approved the merger agreement. The deal was finalized by Ma after he toured Hollywood and met studio executives, acquired control of a Chinese movie studio and put money in the latest “Mission: Impossible” film.
Regardless of the takeover, Victor Koo will remain as chairperson and Chief Executive Officer of Youku. Interestingly the company had seldom posted a profit and is now relying on US studios to produce content that will enamor its Chinese viewers.
Both the two well known Youku and Tencent’s had more than 286 million unique visitors for the month of August. However, according to Bloomberg, viewers spent more time watching content on Youku.
As of June, more than 461 million people had accessed video online according to China Internet Network Information Center. This figure is greater than the complete population of US. The Center further reveals that 354 million users were accessing from mobile phones.