China Online Video Firm Youku Acquires Tudou

Leading Chinese Internet video company Youku will acquire its domestic rival Tudou in a stock-for-stock transaction, the companies said on Monday.

Shareholders in Youku -- whose name means excellent and cool -- will own about 71.5 percent of the combined company, according to the terms of the agreement announced in a joint statement.

Tudou -- whose name is the Chinese word for potato, a play on "couch potato -- will hold about 28.5 percent of the new group.

Youku founder Victor Koo said the combined company will have China's "largest user base, most comprehensive content library... and strongest monetization capability within the sector".

Youku and Tudou, which went public in the United States in the past two years, have struggled to turn online video into a profitable business despite operating in the world's biggest web market of more than half a billion users.

Tudou reported a net loss of 511.2 million Yuan ($81.2 million) for 2011, while Youku on Monday reported a net loss of 172.1 million Yuan for the same period.

Under the terms of the deal, which is yet to be approved by shareholders, Youku will remain listed on the New York Stock Exchange while U.S. listed shares in Tudou will be cancelled, the statement said.