Alibaba Group Holding Ltd agreed to buy Youku Tudou Inc – popularly known as "China's YouTube" – for about US$3.7bil (RM16.7bil), slightly more than it had offered in October.
The deal announced will give the e-commerce giant access to more than half a billion online video users, accelerating its push into the Chinese digital media market.
It is also a vote of confidence in China's economy by Alibaba Chairman Jack Ma, who has said investors should not overreact to his country's slowing growth.
Alibaba held 18.3% of Youku Tudou as of Oct 16, when it made its initial offer of US$26.60 (RM116.25) per ADS. The new offer values the rest of Youku Tudou at about US$4.8bil (RM20.9bil).
The new offer represents a premium of 35.1% over Youku Tudou's closing price on Oct. 15.
Any deal would include the US$1.1bil (RM4.37bil) of cash held by Youku Tudou, Alibaba's chief financial officer, Maggie Wu, said in October.
Based on this, Alibaba will end up paying about US$3.7bil (RM16.1bil) under its revised offer.
Unprofitable Youku Todou needed the partnership with Alibaba, Summit Research analyst Henry Guo said.
Youku Tudou chief executive Victor Koo, a Bain & Co alumnus who owns about 18% of Youku Tudou, will remain CEO of Youku Tudou after the deal closes in the first quarter of 2016.
"With Alibaba's support, Youku Tudou's future as the leading multi-screen entertainment and media platform in China has been firmly secured," Koo said in a statement.
Formerly bitter rivals, Youku - which means "what's best and what's cool" in Chinese - merged with Tudou ("potato") in a deal worth over US$1bil (RM4.37bil) in 2012.
Alibaba has made a number of sizeable investments in digital media in China in the past couple of years.
In March 2014, it agreed to buy a controlling stake in ChinaVision Media Group Ltd for US$804mil (RM3.5bil) to get access to TV and movie content. The company is now known as Alibaba Pictures.
A month later, Alibaba said it would pay about US$1bil (RM4.37bil)for a 20% stake in Wasu Media Holding Co Ltd.
In March 2015, TV program producer Beijing Enlight Media Co Ltd said Alibaba had invested US$383mil (RM1.6bil).
Morgan Stanley Asia Ltd advised Alibaba, while J.P. Morgan Securities (Asia Pacific) Ltd advised Youku Tudou's special committee. — Reuters