Baidu, Inc. (NASDAQ: BIDU), the biggest online search service provider in the Chinese mainland, is said to complete the acquisition of domestic online video website PPS soon.
People in the know disclosed in an interview recently that the deal would be completed by Iqiyi.com, the online TV and movie portal of the Nasdaq-listed firm and the consideration was USD 350 million to USD 400 million. And upon the completion, a dual-brand operating strategy would be adopted and a list of backstage consolidations would be launched in the meantime. And by then, the No.1 position of leading Chinese online video website Youku Tudou Inc. in the domestic market would be challenged.
Neither Baidu or Iqiyi.com nor PPS has made a comment on the report. People close to the deal said that it was investors of PPS that unveiled details of the deal and Baidu had sent a term sheet of equity investment to PPS and related due diligence investigation had been almost completed. And a major reason for PPS to deny the report in the past was that it had not signed a formal agreement with Baidu. In addition, it wanted a higher consideration. Notably, PCCW Ltd. (SEHK: 0008) was a major shareholder of it and as a listed firm, the Hong Kong-based one did not want it to unveil the deal before a formal contract was inked. PPS had completed four rounds of financings and in the fourth one, PCCW acquired about 2.39 million shares of it for about USD 28.64 million, or about HKD 223 million, in October 2011.
An analyst with Eguan.com pointed out that days of online video websites in the market was hard currently and pressed by sharply increased copyright price, few of them had enjoyed a profit-making operation. The profit-making operation of PPS should be mainly attributed to its gaming and client-side resource and it should be also the resource that directly caused Baidu to make such a decision. Available data shows that the installment volume of its client-side had reached over 500 million.
People in the circle pointed out that leading online video websites in the market including Youku Tudou, Leshi, and Iqiyi.com were rich in capital and compared with them, those smaller rivals saw days be harder. And currently, the best way for the latter to change the situation was to be acquired. PPS was small in size but had more commercial modes and if those leading ones wanted to put one into pocket, it was a better choice undoubtedly.
