Chinese e-commerce giant Alibaba made a non-binding offer to acquire all outstanding shares of Youku Tudou in a deal worth about $3.6 billion.
Youku Tudou is one of China’s two largest streaming providers, alongside Tencent, drawing 500 million monthly users with a mix of movies and TV shows, both licensed and produced in-house, and user-generated content.
Alibaba already owns 18.3% of Youku Tudou, which it bought for $1.2 billion in 2014. In a press release issued Friday, Alibaba said it is offering $26.60 per share in cash for outstanding Youku Tudou stock, which is 30.2% over Thursday’s closing price on the New York Stock Exchange. The deal gives Youku Tudou a valuation of approximately $5.2 billion.
YouKu Tudou was created in 2012 by the merger of streaming site Youku Inc. and its smaller competitor Tudou Holdings Ltd. in a $1 billion stock swap.
The Alibaba buyout has the backing of key Youku Tudou shareholders, including Victor Koo, the company’s founder, chairman and chief executive officer, and Chengwei Capital, who joined others in voting their shares in favor of the transaction in an agreement with Alibaba dated Oct. 16. Under the terms of the proposal, Koo will continue to lead the company as chairman and CEO. The deal is subject to shareholder approval.
With the acquistion, Alibaba plans to use its data-driven platforms in e-commerce, media and advertising in concert with Youku’s large user base, particularly in mobile, to power its digital entertainment strategy.
The two companies already have some complementary content. Last month, Alibaba entered into a multi-year with NBCUniversal that will make Universal Pictures entire new release slate and back catalog made available on TMall Box Office, the e-commerce giant’s subscription VOD service. Less than a week later, Youku Tudou inked a multi-year licensing deal with Paramount Worldwide Television Licensing & Distribution that added over 100 titles to its catalog.
“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,” said Daniel Zhang, CEO of Alibaba Group, in a statement. “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.”