Reuters: Deals: Youku to buy Tudou in China online video deal

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Youku to buy Tudou in China online video deal Mar 12th 2012, 10:53 Mon Mar 12, 2012 6:53am EDT (Reuters) - Youku.com (YOKU.N), China's largest online video company, is to buy second-ranked Tudou Holdings Ltd (TUDO.O) in an all-stock deal valued at more than $1 billion to create an industry leader in the world's biggest Internet market. Once the deal is completed, the combined entity will be named Youku Tudou Inc. Youku's market value of around $2.85 billion is six times that of Tudou. The two firms have been bitter rivals, locking horns in courtroom battles over alleged copyright infringement and unfair competitive practices. Youku filed a lawsuit against Tudou earlier this year seeking 4.8 million yuan ($762,000) in compensation, saying it had incurred losses because of claims by its smaller rival that Youku had misused copyrighted material, the official Xinhua news agency reported in February. The row began in December when the two firms traded accusations of stealing and reposting videos from each other's sites. Analysts said bringing the two companies together was a good move for a highly competitive industry Fighting over more than 450 million Internet users. "We know online video is way too competitive. There are 10 players, where there should be only one to two players," said Michael Clendenin, managing director of Shanghai-based RedTech Advisors. "At the end of the day, after this merger there are still too many players in the industry," he said, noting others such as Sohu.com Inc (SOHU.O), Baidu Inc (BIDU.O), and Tencent Holdings Ltd (0700.HK), which is trying to develop an online video platform. "These are not small, insignificant players. So even though this is a step in the right direction in terms of consolidation, there's still a long way to go," Clendenin added. A person close to the deal, who asked not to be named as the information was not public, said China's online video industry is highly competitive. "Although Youku and Tudou are leaders today, competition is just intensifying. Companies like Baidu, Shanda and Sohu all have vehicles to compete in the space - so content and bandwidth costs are getting expensive because people haven't reached the scale." "There are traffic and ad rate synergies because you will get advertisers to pay more on a more powerful platform," the person added. Goldman Sachs, Allen & Company LLC and China Renaissance Holdings Ltd are financial advisers for Youku, the two companies said in statement. Morgan Stanley acted as lead financial adviser and Credit Suisse as co-financial adviser for Tudou on this deal, they said. (Reporting by Arpita Mukherjee in Bangalore and Melanie Lee in Shanghai; Writing by Kazunori Takada; Editing by Ian Geoghegan) Link this Share this Digg this Email Reprints

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