Shares for Baidu closed yesterday up 3.7 percent to $87.65, and rose over 2 percent on Tuesday to as high as $89.88.
The acquisition is expected to be finalized during the current quarter, and is especially significant for Baidu as it allows the company a greater range of motion in its competition with China’s other dominant video site Youkou-Tudou. The company will integrate PPS into its own already-existing video service iQiyi, making it China’s largest video provider for mobile.
In terms of industry consolidation, the move harkens back to Google’s (GOOG) $1.65 billion 2006 acquisition of YouTube. It is also an echo of Baidu’s purchase of iQiyi which began as a joint investment between the former and Providence Equity Partners, and ended with Baidu’s buying-out of Providence’s stake late last year.
Youku-Tudou itself was created as a result of a merger last year, while the e-commerce company Alibaba just last week purchased a significant stake in the Twitter-esque service Weibo. Yahoo! (YHOO) owns 23 percent of Alibaba.
iQiyi CEO Gong Yu highlighted the “strong technology DNA” of both his company and Baidu, and went further to say that the move “lays a solid foundation for iQiyi to become a great technology company with strong media DNA as well.”
The acquisition is also a sign that Baidu, who went unchallenged for many years as the Chinese internet search engine, is feeling a certain amount of pressure from increasing competition. On Monday, Qihoo 360 Technology (QIHU) spiked some 8 percent to close the day at $37.30. Qihoo went public a little over 2 years ago, grabbing 10 percent of the market almost instantly.
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