Alibaba’s deal-making has slowed in recent months, but it just made another big-ticket bet—a $3.6 billion offer to take over Youku Tudou, one of China’s largest Youtube-esque video streaming sites.
The company made an offer today (Oct. 16) for all of Youku’s remaining shares on currently on the New York Stock Exchange at $26.50 per share, a markup of over 30% from its current price. Alibaba currently owns an 18% stake in Youku, which it acquired in late 2014.
The purchase, if completed, will value Youku Tudou at $4.2 billion.
Going private may be a welcome shift for Youku Tudou. The company’s share price on the NYSE has been mediocre, and after an initial bump has been flat for most of its five years as a public company. Last quarter it reported a $55 million net loss, more than double the year prior. Stiff competition from similar Chinese video streamers like LeTV and Baidu’s iQiyi has led Youku and rivals to spend hundreds of millions of dollars acquiring licenses for famous movies and TV shows, in hopes of differentiating themselves and attracting more eyeballs. But these efforts have been largely futile.
Alibaba, meanwhile, has been on a deal-making binge. In the past two years Alibaba has invested in everything from China’s answer to Bloomberg to one of Asia’s most popular browser apps to various entertainment companies.
Despite its weak financial prospects as an independent company, Youku Tudou remains a valuable internet property, particularly for Alibaba. The company claims to be pulling 580 million unique visitors every month. Alibaba is moving aggressively into entertainment. It produces and distributes films through its Alibaba Pictures branch, and also recently launched a Netflix-esque subscription streaming service called TBO. Youku Tudou could help funnel more viewers towards Alibaba’s movies and TV shows.
“Digital products, especially video, are just as important as physical goods in e-commerce, and Youku’s high-quality video content will be a core component of Alibaba’s digital product offering in the future,” said Daniel Zhang, CEO of Alibaba, in a statement.