Alibaba and Yunfeng Capital Purchase 18.5 Percent Stake in Youku Tudou for $1.22 Billion

Alibaba Group Holding Ltd. and founder Jack Ma’s private-equity firm Yunfeng Capital will purchase a combined 18.5 percent stake in Chinese internet television company Youku Tudou Inc. for $1.22 billion, according to a statement released by Youku Tudou.

Youku Tudou, often referred to as China’s Youtube, was formed in March 2012 when two of China’s largest video sites, Youku and Tudou, merged in a $1.1 billion deal. The video website currently reaches more than 400 million people in China.

As part of the deal, Alibaba will receive a 16.5 percent share and Yunfeng Capital will receive a 2 percent share. The purchase will also give Alibaba’s chief executive Jonathan Lu a seat on the board of Youku Tudou.

This purchase marks the third major Alibaba investment in the digital entertainment sector in the past several months. On March 12, Alibaba purchased a 60 percent stake in ChinaVision Media for $804 million. One month later, Alibaba affiliate Hangzhou Yunxi Investment Partnerhip Enterprise purchased a 20 percent stake in Wasu Media Holding Co. Ltd.  In the past year alone, Alibaba has spent more than $3.5 billion on at least seven acquisitions as the company gears up for its third-quarter US initial public offering.