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Alibaba Prices China's YouTube Cheap: Brooke Sutherland

Youku Tudou should ask for more money.

Alibaba on Friday offered to buy the 81.7 percent of the website operator -- China’s version of YouTube -- that it doesn’t already own for about $3.5 billion minus net cash. The $26.60-per-ADR offer is a 45 percent premium to Youku’s average stock price in the 20 days prior.

That’s more than double the average premium paid for similar-sized buyouts of U.S.-traded Chinese companies in the past two years.

Average premiums paid for takeovers of U.S.-listed Chinese companies of more than $500 million

And Alibaba is bringing more than just cash to the table. Plugging Youku into Alibaba’s Internet ecosystem -- which includes 350 million active buyers on its China e-commerce sites -- will help Youku grow much faster than it could on its...