Chinese e-commerce group Alibaba has made an offer to buy out Youku Tudou, one of China’s two largest streaming video operators.

Alibaba currently owns 16.5% of Youku Tudou, which is listed on the New York Stock Exchange.

Alibaba is offering US$26.60 per American Depositary Share of Youku Tudou, an offer which it says is 30% above the ADS’s recent trading price.

Prior to the deal Youku Tudou’s ADS stood at US$20.41, implying a market capitalization of US$3.80 billion. Alibaba’s offer values the company at US$4.95 billion. Given its current ownership position, Alibaba would be required to pay US$4.14 billion to lift its holding to 100%. Alibaba says it will fund the deal entirely with cash.

Victor Koo, Youku’s founder, is among the Youku Tudou executives who have indicated their support for the takeover bid and have agreed to vote their shares in favor of the deal. Chengwei Capital, another major shareholder, has done the same.

The deal represents a further stage in the consolidation of the new, huge and hugely important sector of China’s fast-changing entertainment environment.

All of the major platforms have been engaged in a cutthroat battle to secure top quality local and imported content. The battle has pushed up content costs as a proportion of their total revenues and has kept all of the platforms from achieving profitability.

Youku Tudou, which itself was formed as a merger of two platforms, Youku and Tudou, is the only Chinese video ser vice that is publicly traded. Rival Tencent Video is part of the gigantic Tencent social media and games conglomerate, while iQIYI is a subsidiary of Chinese search engine leader Baidu. Smaller player LeVision is part of LeTV, an aggressive player that is aiming to leverage entertainment connections into an e-commerce platform like Alibaba.

Evidence of the stiff competition between the video platforms came earlier this week when iQIYI announced that it will step up its investment in both original and acquired TV shows and movies.