Chinese e-commerce giant Alibaba has revealed its plans to buy YouKu Tudou, one of China's top YouTube-like services, in an all-cash deal.
Alibaba already owns an 18.3 percent stake in the video firm after buying it for a whopping $1.22 billion. The video service is received by more than 580 million viewers each month.
YouKu's market cap is $3.8 billion, and Alibaba intends to pay $26.60 per share - an increase on the most recent closing price of $20.43. The deal will thus value YouKu at around $5.1 billion, according to TechCrunch.
Victor Koo, YouKo's founder and the company's biggest shareholder, will remain chairman as part of the agreement. Mr Koo had agreed to sell his stake, but other shareholders in the company would also need to agree to the deal. The purchase would be the second-largest M&A transaction for the group, surpassed only by its 20-percent stake in electronics chain Suning, which was bought for $4.46 billion back in August. The bid for YouKu Tudou is Alibaba's latest foray into the entertainment sector, as it had already signed licensing agreements with major Hollywood Studios and has spent billions of dollars on stakes in Chinese production houses in order to gain access to its own content, The Financial Times reported.
Alibaba's offer for YouKu Tudou values the 82 percent of the company it does not own at $4.6 billion, but it will end up paying around $3.5 billion, taking into account the $1.1 billion of cash on Youku Tudou's books, according to PC Magazine. This new direction of acquisitions seems like Alibaba wants to be the center of attention in the content industry, and by buying he major video-sharing platform, it aims to do just that.
"Alibaba needs traffic. Online or mobile video is the number one place for that," said Tian Hou, an analyst at TH Capital in New York.
