After investing $1.22 billion in Youku Tudou — Yes, as the name hints, it is an online video streaming service operating out of China — Alibaba has decided to go to the whole hog and placed a massive bid of $4.2 billion towards the acquisition of the company.
Alibaba Group (NYSE:BABA) today announced that it made a non-binding proposal to the board of directors of Youku Tudou Inc. (NYSE:YOKU) (“Youku”) to acquire all outstanding shares of Youku, including shares represented by American depositary shares (“ADSs,” each representing 18 ordinary shares of Youku), that it does not already own for US$26.60 per ADS in an all-cash transaction
The move comes amid concerns among Alibaba’s top brass about the slow growth of the company in recent times, 2015 saw the company’s shares fall below the initial public offering price of $68. Alibaba is probably hoping to get an impetus by integrating its own varied, internet related services with the popular video streaming portal.
As per Daniel Zhang, CEO, Alibaba
We believe that the proposed transaction, with tighter integration of our resources, will help Youku achieve exciting growth in the years ahead by leveraging Alibaba’s assets in living-room entertainment, e-commerce, advertising and data analytics. Digital products, especially video, are just as important as physical goods in e-commerce, and Youku’s high-quality video content will be a core component of Alibaba’s digital product offering in the future.
Although, the proposal still needs to be ratified by the Youku Tudou shareholders, the acquisition stands a good chance of coming through considering that it has the support of the Youku Tudou founders including Victor Koo, Chairman and CEO of the company, along with Chengwei Capital and others.
Alibaba and its investment partner Yunfeng Capital, already control 18.5 percent stakes each, in the company — courtesy last year’s $1.2 Billion investment.