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[NEW YORK] Alibaba Group Holding Ltd offered about US$4.6 billion to buy the rest of Youku Tudou Inc as billionaire Jack Ma seeks to stream more video content to Chinese Internet users through control of the YouTube-like site.
Alibaba will pay the amount in cash for the 81.7 per cent of the video website it doesn't already own, Chief Financial Officer Maggie Wu said during a conference call on Friday. Youku has US$1.1 billion in net cash, resulting in a price of about US$3.5 billion for Alibaba, she said. Alibaba's bid of US$26.60 a share is 30 per cent more than Thursday's closing price. Youku rose 22 per cent, the most since March 2012, to US$24.91 at the close Friday in New York. Alibaba was little changed at US$71.99.
Ownership of Youku Tudou would help Mr Ma deliver US films and drama series to more than a third of China's population as Alibaba battles Baidu Inc. and Tencent Holdings Ltd for the attentions 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 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.
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. Mr 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 US.
Alibaba has averaged more than two purchases a month in 2015, announcing US$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 US studios for programming. The company, which mostly streams professionally produced content rather than amateur videos, plans to collaborate with US entertainment producers to create content for its website, Koo said in an October 2014 interview.
Morgan Stanley is Alibaba's financial adviser, while Simpson Thacher & Bartlett is providing legal assistance.