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China's Video Leaders to Merge

2012-03-13 13:25:59        Chinese Films

Youku and Tudou, two of China's leading online video companies, are to merge. They expect to create the largest video outfit in China.

"We intend to lead the next phase of online video development in China. Youku Tudou Inc. will represent a differentiated leader in the online video market in China with the largest user base, most comprehensive content library, most advanced bandwidth infrastructure and strongest monetization capability within the sector," said Victor Koo, founder, chairman and CEO of Youku in a statement to the NASDAQ stock exchange where both are listed.

Under the terms of the deal Youku shareholders will own 71.5% of the company, Tudou shareholders 28.5%. They plan to keep Youku's stock listing in the US and expect to complete the transaction in the third quarter of the year.

On news of the deal Youku ADR shares jumped 17% to $29.3, Tudou shared more than doubled to $37.9. At these prices the combined company has a theoretical market capitalisation of $4.41 billion.

Both brand names will also be retained.

While the online video market in China is widely forecast to grow, the move represents a significant degree of consolidation, something which Koo acknowledged.

"This transaction would also lead to improvement in the industry structure and the underlying economics of the online video sector in China," said Koo. "We expect to see significant synergies across a number of areas including leveraging licensed content over a larger user base and realising efficiencies in bandwidth management and other common expenses."

Source: Film Business Asia

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