Bigger potato

12 March 2012 By Wei Gu

The $3 bln tie-up of China’s two pure-play online video groups looks like a defensive move in the country’s fiercely competitive Internet market. Diversified players like Baidu and Sina are investing in their own video portals. Profits are coming – but only for those with scale.

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Youku.com, China’s biggest online video company, is merging with rival Tudou Holdings in an all-stock deal. Each American depositary share of Tudou will receive 1.595 ADRs of Youku. Youku, which closed at $25.01 on March 9, fell by 4 percent in pre-market trading on March 12. Tudou, which closed at $15.39, jumped 120 percent on the news in pre-market trade.
Upon completion of the deal, Youku and Tudou shareholders will own approximately 71.5 percent and 28.5 percent of the combined entity, called Youku Tudou, listed on the New York Stock Exchange under the symbol YOKU.
Morgan Stanley Asia Limited acted as the lead financial adviser and Credit Suisse Securities (USA) LLC acted as the co-financial advisor to Tudou. Goldman Sachs (Asia) L.L.C., Allen & Company LLC and China Renaissance Holdings Limited acted as financial advisers to Youku.

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Youku-Tudou price pop not only about synergies

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