On March 12, two Chinese Internet video giants Youku and Tudou
announced that the two companies have signed a final agreement on
March 11 to combine their services in a 100% stock-for-stock
transaction to create a new service provider, Youku Tudou Inc,
allowing Tudou to exit the stock market.
After the combination, Youku's shareholders and holders of
its American Depository Receipts (ADRs) will have 71.5% of equity
of the new company, with Tudou's shareholders and its ADR
holders entitled to 28.5% of the combined equity. Youku's ADRs,
under the symbol of "YOKU", will continue to be listed on
the New York Stock Exchange.
According to the unaudited financial results of 2011 announced
by Tudou and Youku, Tudou and Youku have achieved annual net income
of RMB 511.2 million yuan and RMB 897.6 million yuan last year
respectively. The combined turnover does not reach the application
thresholds for concentration of undertakings prescribed in Article
2 of the State Council's Provisions on Thresholds for Prior
Notification of Concentrations of Undertakings.
Although under Article 4 of the Provisions, the Ministry of
Commerce (MOFCOM) is entitled to launch investigation where a
concentration of undertakings does not reach the filing thresholds,
facts and evidence need to be collected in order to establish that
the transaction results, or is likely to result in elimination or
restriction of competition. As far as we know, MOFCOM has, under
various occasions, said that it is going to promulgate a new rule
on investigation of concentration of operators below the filing
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