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Alibaba, Youku Tudou agree merger

Following the October 16th announcement that online and mobile commerce giant Alibaba Group had made a non-binding proposal to the board of directors of multi-screen entertainment and media company Youku Tudou to acquire all shares that it did not already own, the pair have confirmed their entry into a definitive merger agreement pursuant to which an affiliate of Alibaba Group will acquire Youku Tudou in an all-cash transaction (the Transaction).

Upon completion of the Transaction, the shareholders of Youku Tudou, other than the current investment entity controlled by Alibaba, will have the right to receive $27.60 per American Depositary Share (ADS, each representing 18 ordinary shares of Youku Tudou) in cash. The price represents a premium of 35.1 per cent over the closing price of Youku Tudou’s ADSs on October 15th 2015, one day prior to the date that Youku Tudou announced it had received a ‘going private’ proposal from Alibaba, and a premium of 49.9 per cent to the volume-weighted average closing price of Youku Tudou’s ADSs during the three months prior to October 15th 2015.

Youku Tudou’s board of directors (the Youku Tudou Board), acting on the recommendation of an independent special committee of the Youku Tudou Board (the Special Committee), unanimously approved the merger agreement and the Transaction and recommends that Youku Tudou’s shareholders vote to authorize and approve the merger agreement and the Transaction.

“We believe this combination with Alibaba maximises value for Youku Tudou shareholders and significantly benefits our customers, users and team,” said Victor Koo, Chairman and Chief Executive Officer of Youku Tudou. “We are eager to work with Alibaba to grow our multi-screen entertainment and media ecosystem. We are confident that we will strengthen our market position and further accelerate our growth through the integration of our advertising and consumer businesses with Alibaba’s platform and Alipay services. With Alibaba’s support, Youku Tudou’s future as the leading multi-screen entertainment and media platform in China has been firmly secured.”

The Transaction, which is expected to close in the first quarter of 2016, is subject to customary closing conditions, including the affirmative vote of the shares of Youku Tudou representing at least two-thirds of the shares present and voting in person or by proxy as a single class at an extraordinary general meeting of Youku Tudou’s shareholders. Alibaba has entered into a support agreement with Youku Tudou’s Founder, Chairman and Chief Executive Officer Victor Koo, Chengwei Capital and various entities affiliated with them pursuant to which such shareholders have agreed to, among other things and solely in their capacity as shareholders of Youku Tudou, vote all of the ordinary shares of Youku Tudou beneficially owned by them in favour of the Transaction and against any competing transaction in accordance with the terms of the support agreement. Alibaba and the parties to the support agreement collectively beneficially own approximately 60.6 per cent of the total voting power of the Youku Tudou shares.

Following the completion of the Transaction, Victor Koo will remain as Chairman and Chief Executive Officer of Youku Tudou. If the Transaction is completed, Youku Tudou’s ADSs will no longer be listed on the New York Stock Exchange.

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