The two companies announced that Alibaba and its associate Yunfeng Capital will acquire a mix of existing shares and a tranche of newly issued equity in the New York Stock Exchange-listed Youku Tudou. They are paying $1.6944 per share, corresponding to $30.50 per American Depositary Share.
That is a premium of 26% to the $24.14 price at which the ADS finished trading Friday.
Following the deal Alibaba will hold 16.5% of Youku Tudou and Yunfeng 2%. Jonathan Lu, Alibaba’s CEO will join Youku Tudou’s board of directors when the transaction completes.
“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 CEO of Youku Tudou, in a prepared statement.
“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, Alibaba’s executive chairman.
Alibaba, which is expected soon to launch an IPO worth upwards of $150 billion in New York, has recently been on a buying spree that pushes the auctions and home shopping giant further into media and entertainment.
It has announced plans to buy Hong Kong-listed film producer Chinavision, a stake in Chinese Internet TV group Wasu Media and launched a crowd-funding site. Ma, Yunfeng and Alibaba already have stakes in Huayi Brothers, China’s largest private sector film group, and Media Asia, a Hong Kong film company.