Alibaba to pay $3.7bn for ‘China’s YouTube’

Alibaba Group has entered into an agreement to buy ‘China’s YouTube’, Youku Tudou, for around US$3.7 billion, with the deal’s total value coming in closer to US$5 billion.

The deal means e-commerce giant Alibaba will buy the shares in Youku Tudou it did not already owns, raising its stake from the current 18.3%.

The overall value of the deal is thought to be around US$4.6 billion, with Bloomberg citing sources that put it closer to US$4.8 billion.

Youku Tudou has more than half a billion users in China. Its chairman and CEO, Victor Koo, will remain in his post upon closure of the agreement in the first quarter of 2016.

Koo, Chengwei Capital, Alibaba and other investors whom collectively own around 60.6% of shares are working together on the deal, which Alibaba has described as a “merger”.

The overall deal price for the US-listed firm places a 35.1% premium on US-listed Youku Tudou’s American Depositary Share price on October 15, which was a day before Alibaba initially revealed its offer to buy the firm.

Youku Tudou’s board has unanimously approved the plan and recommended shareholders do the same. Each shareholder will receive US$27.60 per ADS share sold.

Youku Tudou’s shares will then be withdrawn from the New York Stock Exchange as Alibaba, whose CEO is Jack Ma (pictured), takes it private.

Youku Tudou was created in 2012 upon the merger of previously bitter on-demand and video streaming rivals Youku and Tudou.

“We believe this combination with Alibaba maximizes value for Youku Tudou shareholders and significantly benefits our customers, users and team,” said Koo. “We are eager to work with Alibaba to grow our multi-screen entertainment and media ecosystem.”

For Alibaba, the move the latest in a spate of investments in the media sector. In March last year, it bought a controlling stake in TV and film producer ChinaVision Media Group for US$804 million, rebranding it as Alibaba Pictures.

It then took a 20% stake in Wasu Media Holding, before investing US$383 million in Rising Star China producer Beijing Enlight Media.

The company also came close to buying a stake in US studio Lionsgate Entertainment, and has launched a premium SVOD platform in China, Tmall Box Office.

The Youku Tudou acquisition is subject to customary closing conditions.