China's Alibaba Offers to Fully Acquire Youku Tudou, Deal Values Web Video Giant at $4.2B

Jack Ma Alibaba H

The e-commerce powerhouse had previously bought a minority stake in the "YouTube of China."

Chinese e-commerce giant Alibaba Group has made a non-binding offer to the board of directors of Youku Tudou to acquire full control of the online video giant, the latter said on Friday.

It said Alibaba, led by executive chairman Jack Ma, has offered to acquire all outstanding shares of Youku Tudou, including American depositary shares (ADS), that it does not already own for $26.60 per ADS in an all-cash transaction. The deal values the whole company at $4.2 billion based on the number of shares outstanding as of Dec. 31, based on Bloomberg data.

"The offer price set forth in the proposal letter represents a premium of approximately 30.2 percent over the closing price of the ADSs ... on October 15, 2015, the last trading day prior to this announcement, and a premium of 44.5 percent to the volume-weighted average closing price of the ADSs ... during the last three months," the company said.

In May 2014, Alibaba made a strategic investment of $1.2 billion in Youku Tudou, which has been called the "YouTube of China," for a 18.5 percent stake. The offer to buy full control would take Youku private.

Certain Youku shareholders, including Victor Koo, the company's founder, chairman and CEO, are supporting the deal and have agreed to vote their shares in favor of the transaction.

The Youku board has formed a special committee consisting of two independent directors to evaluate the transaction. The special committee will retain independent legal and financial advisors to assist it in this process, the company said.