Jack Ma’s Alibaba has completed its major acquisition of Chinese multi-screen entertainment and media giant Youku-Tudou by shelling out $3.67 billion to get its hands on the remaining shares in the company, the two companies announced on Friday in a joint statement.
Prior to this, Alibaba, the world’s largest e-commerce services provider, had invested $1.2 billion for a 18.3% share in Youku-Tudou and offered to buy out the remaining 81.7% for $26.60 a share.
It will now gain access to more than half a billion monthly online video users, marking a significant next step for Ma’s company in its plan to dominate the fast growing Chinese digital media market.
It is also being seen as a vote of confidence in China’s economy by Chairman Ma, who has said investors should not overreact to his country’s slowing growth.
Youku-Tudou’s board of directors unanimously approved the merger agreement and have urged shareholders to act in kind. The company desperately needed the support of Alibaba, Summit Research analyst Henry Guo said.
The deal is expected to be finalised in the first quarter of 2016 with Youku Tudou Chief Executive Victor Koo remaining CEO after the merger.
“We are eager to work with Alibaba to grow our multi-screen entertainment and media ecosystem,” Koo said in a statement. “We are confident that we will strengthen our market position and further accelerate our growth through the integration of our advertising and consumer businesses with Alibaba’s platform and Alipay services. With Alibaba’s support, Youku Tudou’s future as the leading multi-screen entertainment and media platform in China has been firmly secured.”
Youku-Tudou itself is the result of a previous merger between rival companies Youku and Tudou in a deal worth over $1 billion in 2012.
In recent years Alibaba has made a number of investments in digital media in China. In March 2014 it bought a stake worth $804 million in ChinaVision Media Group Ltd, now known as Alibaba Pictures. The next month Alibaba said it would pay about $1 billion for a 20% stake in Wasu Media Holding Co Ltd. This year TV program producer Beijing Enlight Media Co Ltd reported Alibaba had invested $383 million.
The company also announced plans to launch an online video streaming service similar to Netflix called TBO.
News of the merger of course comes at the same time as Ma is embroiled in a lawsuit filed by Paris-based Kering SA regarding the sale of fake goods, and just days before Singles’ Day, China’s biggest shopping holiday.
By Daniel Paul