Alibaba, Yunfeng in Deal to Acquire Youku Tudou State for $1.2 Billion

Alibaba Group Holding Ltd and Yunfeng Capital have entered into a deal to buy stake worth $1.22 billion in a video website Youku Tudou Inc. Youku stock lost.

The agreement highlights rising competition between two internet giants in China, Alibaba and Tencent Holdings Ltd, as they venture into each other’s territory.

The new acquisition is the third largest by Alibaba and its founder within a period of less than two months and brings the company’s total acquisition spree to close to $4.0 billion in the last six months, as Reuters reports.

As Duncan Clark of tech advisory BDA in Beijing says, Alibaba and Tencent are striving to avoid letting the rival firm acquire a feasible venture.

Both Alibaba and Yunfeng Capital will own 18.5% of stake in Youku in partnership. Youku runs a video services company similar to Google’s YouTube. Under the deal, the CEO of Alibaba Jonathan Lu will enter Todou’s board.

According to Bloomberg, Alibaba will hold a stake of approximately 16.5% in Youku while Yunfeng will own 2%.

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“Alibaba’s investment will strengthen Youku Tudou as China’s largest online video platform and further differentiate our services and user experience,” said Victor Koo, Youku’s chairman and CEO.

Alibaba is set to go for a US initial public offering that could generate up to $15 billion. The firm has not yet disclosed how much it will be seeking in the IPO.

Yunfeng Capital, which is a Chinese private equity company was co-founded by Ma of Alibaba and intends to raise as much as $1 billion in its second round of funding.

In April, Alibaba agreed to acquire AutoNavi holdings Ltd. The company said in March that it would inject up to $700 million in Intime Retail Group Co, which operates Chinese department stores and supermarkets.

Analyst Jiong Shao of Macquarie Group Ltd said that Alibaba’s strategic acquisition of stake in Youku substantially completed its platform for online TV.

To contact the writer of the article: Yashu Gola at yashu@forexminute.com

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