* Alibaba, Yunfeng to pay 26.3 pct premium to last traded
* The two will own 18.5 pct stake in Youku
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HONG KONG, April 28 Alibaba Group Holding Ltd
and a private equity firm co-founded by its executive chairman
Jack Ma have agreed to buy a $1.22 billion stake in Youku Tudou
Inc, as China's ecommerce giant intensifies its focus
on online video business.
The deal underscores the growing rivalry beetween China's
two Internet giants - Alibaba and Tencent Holdings Ltd
- as they attack each other turf.
Alibaba's Youku Tudou investment is the third major media
acquisition by the company and its founder in less than two
months and brings Alibaba's deal making spree to nearly $4.0
billion in the past six months.
"Alibaba and Tencent are clearly not wanting to run the risk
of the other company buying something useful," said Duncan
Clark, chairman of Beijing-based tech advisory BDA.
Alibaba and Yunfeng Capital are paying $30.50 per American
Depositary Receipt of Youku, or a 26.3 percent premium over the
last traded price, Youku Tudou said in a statement on Monday.
The two companies will jointly own a 18.5 percent stake in
Youku, whose online video services resembles Google Inc's
YouTube. Alibaba CEO Jonathan Lu will join Tudou's
"Alibaba's investment will strengthen Youku Tudou as
China's largest online video platform and further differentiate
our services and user experience," Victor Koo, chairman and
chief executive officer of Youku Tudou said in a statement.
Alibaba is preparing for a U.S. initial public offering,
which could raise more than $15 billion, Reuters previoulsy
Chinese private equity firm Yunfeng Capital was co-founded
by Alibaba's Ma and is raising up to $1 billion in its second
fund, Reuters previously reported.
"If Alibaba can try to find traffic in the media world
that's driving all the eyeballs and make a consumer play that's
desirable," Clark added.
"For Alibaba anything to boost their consumer facing non
e-commerce business is useful, though I don't know whether they
can make money or not," said Clark. "As with YouTube, it never
made Google much money but it did help them boost traffic," he
Last month, Tencent and online retailer JD.com agreed to
combine their ecommerce operations to take on dominant rival
Alibaba, a move that also took an aim at Alibaba's weakness in
That deal gave JD.com a headline slot on Tencent's WeChat
app that dominates China's smartphones, an entry into eBay-style
consumer-to-consumer shopping and a backer with the muscle to
help it make the most of a logistics infrastructure that Alibaba
In March, Alibaba agreed to fork out $804 million to take a
60 percent stake in ChinaVision Media Group Ltd, a
Hong Kong-listed film and television producer and distributor.
Earlier this month, Ma and co-founder Simon Xie agreed to
take a 20 percent stake in online media company Wasu Media
Holding Co., a cable and TV company which also
manufactures Internet TV set-top boxes, for 6.54 billion yuan.
The investment was made via Hangzhou Yunxi Investment
Partnership Enterprise using a loan from Alibaba.
ChinaVision and Wasu Media each said they would seek to
explore future opportunities with Alibaba, in online
entertainment and integrated television respectively.
Morgan Stanley is advising Alibaba, while Goldman
Sachs is Youku's financial advisor.
(Reporting by Denny Thomas and Elzio Barreto, Paul Carsten and
Matthew Miller in BEIJING; Editing by Miral Fahmy and Mark