Alibaba Group Holding and Yunfeng Capital, a private equity firm cofounded by executive chairman Jack Ma, are going to use $1.22 billion (€880 million) to buy a stake in Youku Tudou Inc., a local online video business.
The deal marks a new chapter in the growing rivalry between Alibaba and Tencent Holdings as they start expanding into each other’s areas of expertise.
While the $1.22 billion price tag may sound incredibly high, it’s actually the third major media acquisition in less than two months. Over the past six months alone, the shopping spree has neared $4 billion (€2.88 billion).
The two companies – Alibaba and Tencent – appear to be challenging each other to buy the best businesses out there that would give them the best return for their investment and the upper hand in the battle between brands.
Alibaba and Yunfeng Capital will hold an 18.5 percent stake in Youku for approximately 707 million newly issued shares and 13,869,990 existing Class A ordinary shares. Alibaba will hold approximately 16.5% and Yungeng 2% as per the amounts they invested.
On top of this, Jonathan Lu, Alibaba’s CEO, will join the streaming service’s board as part of the deal, reads the announcement made by the Youku Tudou.
“We are very pleased to have Alibaba as our strategic investor. Alibaba's investment will strengthen Youku Tudou as China's largest online video platform and further differentiate our services and user experience. It will help us continue to build an immersive cultural entertainment platform that integrates online and offline entertainment,” said Victor Koo, chairman and chief executive officer of Youku Tudou.
The transaction is expected to close in the near future if things go according to plan.
“We are excited to cooperate and work closely with Victor and his team to support their innovation in this key emerging space as well as accelerate our digital entertainment and video content strategy/ This is an important strategic initiative that will further extend the Alibaba ecosystem and bring new products and services to Alibaba's customers,” said Jack Ma, executive chairman of Alibaba.
Well-known bank Goldman Sachs will be serving as Youku Tudou’s financial advisor throughout this whole process.
Youku Tudou has become the leading Internet television company in China. The service resembles Google’s YouTube and enables users to search, view and share high-quality video content in a hasty manner and over a series of devices working on multiple platforms.