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Alibaba Takes 18.5% Stake in Youku Tudou

Youku Tudou, 4/28/14

Chinese online video site operator Youku Tudou (NYSE: YOKU) today announced that the company has entered into definitive agreements with a joint investment vehicle of Chinese e-commerce conglomerate Alibaba Group and Yunfeng Capital pursuant to which Alibaba and Yunfeng Capital, through the joint investment vehicle, will invest an aggregate of approximately USD 1.22 bln to purchase a number of Class A ordinary shares from the company, estimated at 707,250,870 newly issued shares, and 13,869,990 existing Class A ordinary shares, at a purchase price of USD 1.6944 per share, corresponding to USD 30.50 per American Depositary Share of the company, each representing 18 Class A ordinary shares.

Alibaba and Yunfeng Capital will indirectly hold approximately 16.5% and 2.0%, respectively, of the total issued and outstanding shares of the company on a fully-diluted basis determined under the treasury method, after taking into account the shares to be issued in the transaction. The transaction is expected to close in the near future, subject to the satisfaction of customary closing conditions. Jonathan Lu, Chief Executive Officer of Alibaba, will join Youku Tudou's board of directors upon completion of the transaction.

Editor's Note: Alibaba chairman Jack Ma is the founder of Yunfeng Capital. In Marbridge's Q1 2014 Chinese Paid Search Report, we explained that although industry rumors began to circulate in late March that both Tencent and Alibaba Group were in discussions with Youku Tudou about a possible investment in the latter, Marbridge felt the likelihood Tencent would invest in Youku Tudou seemed low, as Tencent already reportedly has an agreement with Sohu Video on video traffic (in compensation for any video traffic lost from Qihoo when Sogou snubbed Qihoo in favor of a merger with Tencent’s search business). Accordingly, if investing in Youku Tudou, we noted, Tencent would be circumscribed in terms of how much video traffic it could offer to Youku Tudou.

Keywords: investment Jack Ma Jonathan Lu Internet online video Youku Tudou Alibaba Group YOKU Yunfeng Capital M&A

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