Alibaba may soon be spreading its digital media wings through a major acquisition.
Reports indicate that Alibaba is buying Youku Tudou, the “YouTube of China” as its commonly referred, for roughly $3.7 billion. This amount, Reuters reported, is higher than its initial offer last month. The deal was officially announced late last week (Nov. 6).
The draw for Alibaba is the video hosting site’s more than half a billion users, which would align with Alibaba’s vision to embed itself deeper into the online media market. Alibaba already owned 18.3 percent of Youku Tudou, and with its new acquisition price offer, the company has a reported value of $4.8 billion.
Reuters reported last month that the deal will involve $1.1 billion in cash from Youku Tudou, according to Alibaba CFO Maggie Wu.
Youku Tudou CEO Victor Koo, who also owns roughly 18 percent of the company, will maintain his role when the deal is finalized in the first quarter of next year.
“With Alibaba’s support, Youku Tudou’s future as the leading multi-screen entertainment and media platform in China has been firmly secured,” Koo said in a statement to Reuters.
Recently, Alibaba’s press has been focused on its dipping shares, which has even caused Chairman and Founder Jack Ma to respond to shareholders to confirm his confidence in the future of Alibaba. He’s also addressed shareholders about China’s economic woes.
In a letter to shareholders last month, Ma shared insights into Alibaba’s growth, assuring investors that the company was equipped to wade through the economic issues going on in China.
“I do not agree with the notion that consumption will decline as economic growth slows,” Ma wrote. “Western consumers may have trouble borrowing to maintain their lifestyles, but their Chinese counterparts have savings for retirement or for times of crisis. Therefore, slower economic growth does not mean declining purchasing power. With the convenience and value-for-money merchandise offered by eCommerce, consumers are becoming more and more willing to shop online.”
“China does not lack domestic consumption power,” he continued. “Being thoughtful about how to ignite that power is the key.”
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