Baidu is to China what Google is to the United States, and it has now received an offer from Chinese video streaming service Qiyi to buy its majority stake which is valued at about $2.8 billion - New York Times reports.
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Having received the offer from Qiyi, Baidu does not want to rush out to acquire the business, choosing to take its time to consider things properly before making the move. Baidu owns 80.5% stake in Qiyi, and both Robin Yanhong Li, Baidu chairman and CEO, and Yu Gong, CEO of Qiyi, are offering to buy up the stake.
Business analysts speculate that the joint ownership of the stake between Baidu’s CEO Li and Qiyi’s CEO Gong might open up iQiyi for an initial public offering. Qiyi is now known as iQiyi. The management of the company had before this time indicated their interest at listing the business to US investors.
Providence Equity Partners and Baidu established Qiyi in 2010, but in 2012 Baidu bought out the stake belonging to Providence and retains majority stake. Analysts say listing the video site will enable it to retain talent by offering new stock incentives and greater independence to the company’s leaders.
Alibaba and Tencent are Baidu’s great rivals, and they all compete in online-to-offline services where customers can order for products and services that can be delivered directly at home among other things. But Baidu continues to face rising costs which made its operating profit for quarter ended September 30 to decline to a third of what it used to be.
“The board cautions Baidu’s shareholders and others considering trading in its securities that the board recently received the nonbinding proposal and no decisions have been made with respect to Baidu’s response to the proposal,” Baidu said in a news release.
“There can be no assurance that any definitive offer will be made, that any legally binding agreement will be executed or that this or any other transaction will be approved or consummated,” the company added.
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Baidu said its board of directors had formed a special committee of three independent directors to evaluate the transaction. The law firm Skadden, Arps, Slate, Meagher & Flom has been hired to advise the committee.