Alibaba Group Holding Ltd, China's Internet conglomerate, will spend about $800 million buying the control of a Hong Kong-listed media group, a move that will enable the e-commerce giant to tap into digital content production.
Alibaba will pay HK$6.24 billion ($804 million) for a 60 percent stake in ChinaVision Media Group Ltd, which has a rich business portfolio from print media, television and films to mobile games.
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The purchase of ChinaVision Media's new stock, at a 22 percent discount to the last closing price, will take the stake held by Alibaba and parties acting with it to 70.8 percent, according to a ChinaVision filing to the Hong Kong stock exchange on Tuesday.
The investment from Alibaba pushed the share price of ChinaVision up about 186 percent to HK$1.83 on Wednesday from the previous closing price of HK$0.64.
The deal is Alibaba's second major move in the merger and acquisitions field this year after the Internet titan bought mapping service AutoNavi Software Co Ltd in February for a price of $1.1 billion.
The deal was designed to help Alibaba to access ChinaVision's television programs, films and other digital content, which are experiencing surging demand from China's rapidly growing number of mobile Internet users.
"The demand to acquire data and content over mobile and mobile-related devices is absolutely enormous," said Colin Light, China digital consulting leader for PricewaterhouseCoopers in Hong Kong. The deal enables Alibaba to leverage its huge mobile and Internet-based users into an adjacent market, namely content media, he added.
In a telephone interview with China Daily, Light said observers have seen a dramatic trend around the world that media consumption is shifting from big screens, such as televisions, to small screens on mobile devices.
The shift is particularly strong in China, where more than 80 percent of Chinese Internet users access the Internet via mobile devices. The shift of media is expected to lead a shift in advertising money, according to a recent report from PricewaterhouseCoopers.
Almost 75 percent of digital advertising comes from search and display in China.
There are currently few contenders big enough to take on Baidu Inc's 80 percent share of the search market. Yet key social media sites such as Sina Weibo and Tencent's popular mobile messaging app Wechat, which has more than 600 million accounts, are beginning to grab a share of the digital advertisement market, said the report.
The investment is a financially wise decision for Alibaba.
"Through building online retail platforms, Alibaba serves as a commodity trader. In the same way, it can become a digital content trader. The investment fits naturally with Alibaba's business model," said Light.
According to ChinaVision Media's official website, the company participated in the production and distribution of some very well known movies and television dramas in China.
In addition, the company co-manages the Beijing Times, the biggest morning newspaper in the Chinese capital, and has been jointly developing a mobile television business with People.cn, an information interaction online platform created by People's Daily, a major State-own media company in China.
"When a company grows to a certain size, it is only a matter of time before they look to own media channels to gain a certain sway in public opinion," said Tian Hou, chief analyst with T.H. Capital LLC, an independent research and investment advisory firm.
She added that getting involved in media content production is also in line with Alibaba's mobile strategy. The company announced earlier this year it would enter the mobile gaming industry. ChinaVision media also produces mobile games.