Reporting from Beijing — Youku Inc., China’s leading online video site, reached an agreement to merge with its smaller competitor, Tudou, in a stock deal between the two New York-listed companies worth more than $1 billion.
The deal, which was announced Monday, creates an unlikely partnership between two companies that have struggled to turn a profit in China’s booming Internet space. The two websites have long been bitter rivals, fighting in court over alleged copyright infringement.
The new company, named Youku Tudou Inc., would command more than a third of the online video advertising market in China, challenging domestic online giants such as Baidu Inc. and Tencent Holdings Ltd. in a country where Youtube is blocked by censors. It may also evolve to challenge Chinese state television.
“Youku Tudou Inc. would establish a clear and dominant leadership position in China’s online video sector and become one of the largest Internet properties in China,” said Victor Koo, founder and chief executive of Youku. “This transaction would also lead to improvement in the industry structure and the underlying economics of the online video sector in China.”