Youku and Tudou announced today they have signed a definitive agreement for Tudou to merge with Youku in a 100% stock-for-stock transaction thought to be worth $1 billion. The merger will strengthen both companies by enabling them to lower costs and deliver greater scale, and the consolidation will is also thought to be a deterrent to other players such as search giant Baidu from investing even more heavily in the market. Together both companies account for 30% of revenues from the Chinese online video advertising.
“Youku and Tudou share a vision for the future of online video in China and how to deliver the best user experience possible,” said Gary Wang, founder, chairman and chief executive officer of Tudou. “This transaction further strengthens our market position as Tudou brings its valuable brand, library of professional licensed content, user generated content platform, extensive user base, broad range of partnerships and expertise in mobile video. Together, we believe Youku Tudou Inc. will be able to provide the best-in-class experience for users interested in uploading, watching and sharing videos, and to grow together with our advertisers, and our content and industry partners.”
“When the strategic combination is complete, Tudou will retain its distinct brand identity and platform in Youku Tudou Inc., strengthening and complementing Youku’s video business. Youku Tudou Inc. would establish a clear and dominant leadership position in China’s online video sector and become one of the largest Internet properties in China. This transaction would also lead to improvement in the industry structure and the underlying economics of the online video sector in China,” said Victor Koo, founder and CEO of YouKu. “We expect to see significant synergies across a number of areas including leveraging licensed content over a larger user base and realizing efficiencies in bandwidth management and other common expenses.”
