Alibaba Group Holding Ltd has offered to pay $3.5 billion to become the sole owner of Youku Tudou Inc, known as China’s YouTube, in a move that would give the eCommerce biggie access to more than half a billion online video users.
The offer, a vote of confidence in China’s economy from Alibaba Chairman Jack Ma, makes Youku Tudou the latest in a string of U.S.-listed Chinese companies being taken private by big shareholders.
“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.
Alibaba first bought into Youku Tudou in mid-2014, acquiring a stake of about 18% as part of a push into online video, reports Techcrunch. Its offer for Youku Tudou values the 82% of the company it does not own at $4.6 billion. But it will end up paying $3.5 billion, taking into account the $1.1 billion of cash on Youku Tudou’s books, said Alibaba’s Chief Financial Officer, Maggie Wu.
Youku Tudou said the all-cash offer already had the support of its Chairman and Chief executive, Victor Koo.
The proposal marks the latest effort by Alibaba to broaden its portfolio beyond its eCommerce platforms to address the needs and wants of mobile gadget users. The company is facing cut throat competition from fiercely with rival Chinese Internet giants Tencent Holdings Ltd.and Baidu Inc. to capture the growing number of Chinese who use smartphones for everything from ordering dinner to watching TV.