Alibaba Offers $3.6 Billion in Cash for Rest of Youku Video Site

More Chinese People Watch Online Video Than the Entire U.S. Population

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Jack Ma, billionaire and chairman of Alibaba Group, in Hong Kong in February.
Jack Ma, billionaire and chairman of Alibaba Group, in Hong Kong in February. Credit: Lam Yik Fei/Bloomberg

Alibaba offered to buy the rest of Youku Tudou as billionaire Jack Ma seeks to stream more video content to Chinese internet users through control of the YouTube-like site.

Alibaba Group Holding Ltd. will pay $3.6 billion cash for the 81.7% of the video website it doesn't already own, according to a person familiar with the matter who asked not to be named because the information hasn't been made public. The Chinese e-commerce and internet giant didn't say how many shares it was buying. Alibaba's bid of $26.60 a share is 30% more than Thursday's closing price.

Ownership of Youku Tudou would help Mr. Ma deliver U.S. films and drama series to more than a third of China's population as it battles Baidu and Tencent for the attention of internet users. The deal comes after he toured Hollywood to meet with studio executives, took control of a Chinese movie studio and invested in the latest "Mission: Impossible" film.

"Baidu and Tencent have been very aggressive," said Li Chao, a Beijing-based analyst at Internet consultant IResearch. "Taking control of Youku creates more synergy and allows the unit to work better with Alibaba's film unit."

Youku generates revenues through ads, including pre-roll ads, and subscriptions. Youku and Tencent's video sites both had about 286 million unique visitors in August, yet viewers spent more time watching content on Youku, according to data compiled by Bloomberg. Baidu's IQiyi had 273 million visitors.

Chairman stays

Youku Tudou confirmed it received the non-binding proposal, with Chairman Victor Koo, Chengwei Capital and affiliated entities planning to support the bid. The Beijing-based company formed a committee to consider the deal. Koo will be chairman and chief executive officer under Alibaba's proposal.

More than 461 million people in China consumed video online as of June, with 354 million users accessing from mobile phones, according to the China Internet Network Information Center. That's larger than the entire population of the U.S.

Alibaba has averaged more than two purchases a month in 2015, announcing $13.4 billion of transactions, according to data compiled by Bloomberg. This is the 25th acquisition so far this year, the data show.

Youku, which has never posted a profit since its 2010 initial public offering, is zeroing in on U.S. studios for programming. The company, which mostly streams professionally produced content rather than amateur videos, plans to collaborate with U.S. entertainment producers to create content for its website, Koo said in an October 2014 interview.

--Bloomberg News--

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