Breaking News
Investing Pro 0
Cyber Monday Extended SALE: Up to 60% OFF InvestingPro+ CLAIM OFFER

Exclusive-Baidu in talks to sell majority stake in iQIYI, China's answer to Netflix -sources

Stock Markets Jun 15, 2022 06:28AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: People walk near a Baidu logo at the company headquarters in Beijing, China April 23, 2021. REUTERS/Florence Lo 2/2
 
BAC
-2.59%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BIDU
+0.29%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NFLX
+4.32%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CHL
0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TCEHY
+0.29%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BABA
-1.37%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Julie Zhu and Kane Wu

HONG KONG (Reuters) - China's internet search engine giant Baidu Inc (NASDAQ:BIDU) is in talks to sell its controlling stake in iQIYI Inc, China's answer to Netflix (NASDAQ:NFLX), in a deal that could value all of iQIYI at about $7 billion, two people with knowledge of the matter said.

Baidu, which owns 53% of iQIYI and holds more than 90% of its shareholder voting rights, plans to sell all its holdings in the Chinese video streaming services firm, the two people and another two sources familiar with the matter said.

While cinemas have struggled with COVID-19 lockdowns, China's online video market is booming. Domestic consulting firm Zhiyan forecasts 2022 revenue is set to climb to 163 billion yuan ($24 billion), up 17% year-on-year.

Nasdaq-listed iQIYI, the No. 2 player in China's video streaming market after Tencent Holdings (OTC:TCEHY)' Tencent Video, has a market value of $4 billion. Baidu's targeted valuation of $7 billion for the whole company in its divestment would represent a price of about $8.13 per share compared with its latest close of $4.67.

The divestment plan, not previously disclosed by Baidu, comes after the firm deemed iQIYI to be a non-core asset, and as it seeks to sharpen its focus on developing its capital-intensive artificial intelligence and autonomous driving units, the first two sources said.

Terms of the deal have not yet been finalised and are subject to change, said the sources, who declined to be identified due to confidentiality constraints.

Baidu did not respond to a request for comment.

"This is purely market rumour," iQIYI said in an emailed statement to Reuters, without providing further comment.

The iQIYI stake has drawn initial interest from a number of financial sponsors and state-owned companies, said three of the sources, including Hong Kong-based private equity firm PAG.

China Mobile (NYSE:CHL), the world's largest mobile network operator by subscribers and owner of streaming service Migu Video, is also among potential buyers, two of the people with knowledge of the matter said.

PAG declined to comment. China Mobile did not respond to a request for comment.

If Baidu achieves its valuation target, that would represent a premium of more than 100% to iQIYI's average share price over the past three months of $3.97. The streaming firm's shares have lost 70% in the past year amid a broader Chinese tech sell-off.

U.S.-listed shares of iQIYI were down 4.7%, while Baidu rose 4% in premarket trading on Wednesday.

Baidu, whose businesses range from internet search to electric vehicles, with expansion into cloud services, robotaxis and autonomous driving in recent years, has tapped Bank of America (NYSE:BAC) to work on the potential sale, the second pair of sources said.

Bank of America did not offer any immediate comment.

IQIYI HITS, LOSSES

The stake sale plan drawn up by Baidu, worth nearly $50 billion by market value, comes against the backdrop of China's regulatory crackdown since late 2020 on firms from technology, private education and other sectors, which hammered their shares and forced some to scale back expansion in non-core areas.

The Nasdaq Golden Dragon Index, which tracks Chinese companies traded on Wall Street, is down 50% over the past year.

Snaring iQIYI would give a potential buyer the chance to dive into the main market for full-length TV shows and movies.

Tencent Video and iQIYI, as well as smaller rival Youku, owned by Alibaba (NYSE:BABA) Group Holding, offer movies, drama series and reality shows - both original content and material bought from other producers.

iQIYI has made several hit drama series, including "The Long Night" and "The Wind Blows From Longxi". Its original variety shows, "The Rap of China" and "The Big Band", have also been major topics on social media.

On the flip side, cash-burning iQIYI has barely broken even in its 12-year history. In the January-March period, it delivered a quarterly profit for the first time since 2016, when it started to report quarterly earnings.

It recorded a net income of 169 million yuan ($25 million) in the first quarter of the year, compared with a net loss of 1.3 billion yuan in the same period a year earlier, but its revenue dropped 9% to 7.3 billion year-on-year.

Exclusive-Baidu in talks to sell majority stake in iQIYI, China's answer to Netflix -sources
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email