Alibaba Takes Bite of Mango Excellent Media With $947 Million Stake Purchase

E-commerce giant Alibaba will buy 5.26% of TV services provider Mango Excellent Media Co. Ltd. for 6.2 billion yuan ($947 million), the latter announced, potentially bringing together two of the nation’s top online video providers as they bleed money in their battle for market share.

The deal would mark the first major investment by a private internet company in one of China’s foremost state-owned online broadcasters. Alibaba counts the Youku online video service among its major assets, while Mango Excellent Media owns the similarly popular Mango TV.

Under their new equity tie-up, Mango will issue 93.6 million new shares to Alibaba at a price of 66.23 yuan apiece, representing the average price over the last 30 trading days before the announcement, according to an announcement from Mango dated on Friday. The deal would make Alibaba Mango’s second largest stakeholder, behind only its parent, Mango Media, which would hold a majority 59%.

Mango first announced its fundraising plan in September, saying it could raise as much as 4.5 billion yuan by selling 5.26% of the company to as many as 35 investors. At the time it said it would use the lion’s share of the proceeds on programming-related initiatives, including self-productions as well as acquisitions, reflecting the importance of such premium programming in the industry.

But after approaching numerous potential investors, the company decided to settle on a single one, Alibaba, which also has rich resources in the broadcasting and entertainment sectors. In addition to Youku, Alibaba also owns Alibaba Pictures, a filmed entertainment production entity, as well as a couple of online ticketing platforms. It also has major investments in filmed production companies Huayi Bros. and Enlight Media, as well as online video service Bilibili.

Alibaba’s Youku and Mango’s Mango TV are roughly comparable in size, with average daily viewers in the less-than-50 million range, according to market research firm QuestMobile. By comparison, the two biggest players, Tencent Video and iQiyi, the latter controlled by online search leader Baidu, are each about twice that size.

Mango TV is earning a profit, but the other big three are all believed to be losing money as they spend heavily on creating and acquiring exclusive content. In this year’s third quarter, iQiyi, the only publicly traded company among the three big private players, recorded a net loss of 1.2 billion yuan, a big improvement on its 3.7 billion yuan loss a year earlier.

Amid such stiff competition, talk has periodically circulated that one or more companies might be looking to combine their assets in a move of consolidation.

Last year rumors emerged that Alibaba might sell Youku, even though the company denied such talk. Similar rumors emerged in the second half of this year that Baidu was looking to sell its controlling stake in iQiyi, with Tencent, ByteDance and Alibaba all mentioned as potential suitors. Reuters reported last week that Baidu had indeed conducted such talks with Tencent and Alibaba, but that the two suitors had ultimately backed off due to Baidu’s high price demands.

While iQiyi, Tencent Video and Youku are all privately owned, Mango is part of Hunan Broadcasting System, the main state-owned broadcaster for Central China’s Hunan province, and is often considered one of the most successful of China’s many state-owned broadcasters.

Contact reporter Yang Ge (geyang@caixin.com)

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