Daily Management Review

Alibaba Offers $5.2 Billion for All Shares of 'China's YouTube'


10/16/2015




Alibaba Offers $5.2 Billion for All Shares of 'China's YouTube'
Alibaba Group Holding Ltd has offered to buy off all the shares of Chinese video streaming company Youku Tudou Inc that Alibaba does not already own.

Reports said that Alibaba has offered a deal of at about $5.2 billion for the shares of the company that is known as "China's YouTube".

This offer by Alibaba is the latest in a string of incident where U.S.-listed Chinese companies are being taken private by big shareholders. According to analysts this is also a vote of confidence in China's economy by Alibaba's Jack Ma.

18.3 percent of Youku Tudou is already owned by the Chinese e-commerce giant Alibaba. The shares were bought by Alibaba in mid 2014 as part of its push into online video.

"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.
 
According to Hong Kong research firm MCM Partners, this year, offers to go private have been given to about 30 U.S.-listed Chinese companies.  Many of the offers were made with the hope that these Chinese companies would be able to get a better value back in the Chinese market.

When a consortium offered to buy security software maker Qihoo 360 Technology Co Ltd for about $10 billion in June, it marked the biggest proposal in the string of offers ot go private for US based Chinese firms.
 
"Looking ahead, our opinion remains that with a relatively calm domestic market, the going private transaction looks increasingly attractive to founder/managers that have put forward bids," said Ryan Roberts, an analyst at MCM Partners said in a note on Friday.

After falling sharply from June on worries the economy was cooling, the Chinese stocks have been rising recently.
 
A premium of 30.2 percent to Youku Tudou's closing price on Thursday was offered by Alibaba for its all-cash offer of $26.60 per American Depositary Share.
 
Youku Tudou's New York-listed stock was up 24 percent at$25.26 in premarket trading on Friday.
 
Youku Tudou's chairman and chief executive, Victor Koo, supports Alibaba's offer, Youku Tudou said.
According to a securities filing, about 18 percent of Youku Tudou shares are owned by Koo, a Bain & Co alumnus who holds an MBA from Stanford University.
 
Youku Tudou has formed a special committee comprising two independent directors to consider the offer.

"Digital products, especially video, are just as important as physical goods in e-commerce. Youku's high-quality video content will be a core component of Alibaba's digital product offering in the future," Alibaba Chief Executive Daniel Zhang said in a statement.

The $5.2 billion valuation is based on Yukou Tudou's 194.47 million shares outstanding as of June 30.
Alibaba will need to pay about $3.6 billion to acquire the rest of the company if the the cash on Youku Tudou's books is taken into account, according to a source familiar with the matter.

(Sources: www.reuters.com) 
 






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