Alibaba Group Holdings Ltd. (NYSE: BABA) announced Friday that the China-based e-commerce giant will acquire Youku Tudou Inc. (NYSE: YOKU), the country’s leading video streaming company which is also known as “China’s Youtube”, for $27.60 in cash per American depositary share (ADS).
Alibaba increased its offering price by $1.00 per ADS above the offer it made on October 16. The new offer represents a premium of 35.1 percent over Youku Tudou's closing price on Oct. 15.
Alibaba initially invested in Youku in May of last year, taking a $1.22 billion stake in the company, which translates to 18.3% ownership.
The deal announced on Friday will gave the internet giant access to more than half a billion online video users, accelerating its push into the Chinese digital media market. Alibaba is already testing a way for consumers who are watching a show on Youku to be able purchase a product from that show on Alibaba at the same time. There are also other advertising and marketing opportunities for the two companies to work on together, advancing Alibaba's marketing capabilities through its Alibaba services. According to Wedbush analyst Gil Luria, "The acquisition makes strategic sense as Alibaba is building out its media capabilities in order to entrench deeper with the consumer, especially on mobile,"
The deal is expected to close in the first quarter of 2016.
Alibaba stock traded up about 0.44% in the premarket to $85.76 per share. Youku Tudou’s ADSs traded up nearly 9% to $26.55 per ADS.