China's e-Commerce giant Alibaba and Yunfeng Capital, a
private equity company controlled by Alibaba's founder, Jack Ma,
agreed to acquire a combined 18.5% stake in Youku Tudou for $1.22
Formed in 2012, Youku Tudou is China's leading online video
company that broadcasts popular television programs and other
videos over the Internet.
The acquisition follows the announcement of the multi-billion
Alibaba IPO which is expected to garner over $15 billion. After
). IPOs that raised $1.9 billion in 2004 and $2.09 billion in
2013, respectively, Alibaba is expected to be the next largest
Internet stock in the U.S. market, close to
), which earned about $16 billion in 2012.
Per the terms, Alibaba will hold about 16.5%, while Yunfeng
will have about 2% of Youku. Additionally, Jonathan Lu, Alibaba's
chief executive officer, will join Youku Tudou's board. The
latest move is another of Alibaba's strategies to establish its
foothold in the web video content market and boost its video
More than half of the population in China use mobile devices
to access the Internet and Youku Tudou is developing shows to
improve the viewing experience for the increasing number of
viewers. We believe that video content service is one of the
important medium through which Alibaba can launch new products
According to a report by Internet consultant iResearch,
China's market for online video will reach 17.8 billion yuan
($2.85 billion) this year, which will further jump to 36.6
billion yuan in 2017. To tap this opportunity, Alibaba is making
continuous efforts to extend its e-Commerce reach to mobile,
video and distribution business.
In 2013, the company acquired Internet video business
PPStream, Inc. for $370 million and is integrating it with
IQiyi.com, acquired in 2012. Additionally, last month, Alibaba
invested $700 million in Intime Retail Group Co., which owns
department stores and supermarkets in China, to bolster its
mobile and distribution businesses.
Founded in 1999, Alibaba is primarily owned by
) (24%), Japan's Softbank Corp. (37%) as well as other founders
and senior managers (17%). With more than 20,000 employees,
Alibaba competes with Tencent Holdings Ltd. (700) and
) to attract more users to go online for movies, music,
television shows and books.
With a huge market presence, strong business profile and
immense future growth prospects, we believe Alibaba enjoys a
robust global competitive edge and sales flow greater than the
combined offerings of its peers,
). Going ahead, the stake in Youku Tudou would further support
Alibaba's long-term expansion and growth strategies.
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