Beijing Youku Inc, owner of China's most popular online video site, plans to acquire smaller competitor Tudou Holdings. in a $1 billion (Dh3 billion) stock deal that will help lower costs for licensing and transmitting content.
Holders of Tudou's American depositary receipts (ADR) will receive 1.595 ADRs of Youku for each Tudou ADR they own, the two companies said in a joint statement yesterday. Based on Youku's March 9 closing price, the deal values Tudou at $39.89 a share, or 159 per cent more than last week's closing price.
The proposed deal will strengthen the new company's ability to compete with Baidu and Tencent Holdings in adding online video users in a nation where YouTube is restricted.
Huge economies
Youku, owner of China's most-popular online video website, and Tudou together accounted for more than a third of the nation's web video advertising revenue last quarter, according to research company Analysys International.
"There are huge purchasing economies for content through this merger," said Eric Wen, head of internet research at Mirae Asset Securities in Hong Kong. "They need to have scale, bargaining power with upstream TV producers and deter entry by Tencent and Baidu."
Youku's ADRs rose 1.1 per cent to $25.01 in New York trading on Friday, valuing the Beijing-based company at $2.85 billion. Tudou rose 12.5 per cent to $15.39, valuing the Shanghai-based company at $436.4 million. The transaction requires the approval of Youku and Tudou shareholders and is expected to complete in the third quarter, the companies said.
