The offer, a vote of confidence in the market by Alibaba’s Jack Ma in China, is the newest in a sequence of US-listed Chinese firms being taken private by investors that are large.
The ecommerce giant already possesses 18.3% of Youku Tudou, having bought into the business in mid-2014 as part of its drive into on-line video.
“Alibaba wants traffic.
About 30 US-listed Chinese firms have received offers to not go public this year, based on Hong Kong research company MCM Partners, many in the belief that higher valuations are accessible back home.
In the largest planned deal, a consortium offered to purchase security software manufacturer Qihoo 360 Technology for about $10 billion in June.
“Looking ahead, our view stays that with a comparatively serene national marketplace, the going private trade seems increasingly alluring to creator/supervisors that have put forward bids,” said Ryan Roberts, an analyst at MCM Partners said in a note on Friday.
After dropping dramatically from June on stresses Chinese stocks have been increasing lately the market was cooling.
Youku Tudou’s New York-recorded stock was up 24% at $25.26 in premarket trading on Friday.
The chairman and chief executive, Victor Koo, of Youku Tudou supports the offer of Alibaba, Youku Tudou said.
Koo, a Bain & Co alumnus who holds an MBA from Stanford University, possesses about 18% of Youku Tudou, based on a securities filing.
Youku Tudou has formed a special committee consisting of two independent managers to take into account the offer.
“Digital products, particularly video, are equally as significant as physical goods in ecommerce,” Alibaba chief executive Daniel Zhang said in a statement. “Youku’s high quality video content is going to be a center part of Alibaba’s digital product offering later on.”
Considering the money on Youku Tudou’s novels, Alibaba has to pay about $3.6 billion to get the remainder of the business, according to a source familiar with the issue.