Chinese Internet video group Youku Tudou announced that they have established a strategic investment and cooperation partnership with Alibaba, which will hold a 16.5% stake in Youku Tudou.

According to Youku Tudou, Alibaba and Yunfeng Capital will jointly acquire 721 million class A ordinary shares of Youku Tudou for USD1.22 billion. Youku Tudou's 18 class A ordinary shares equal one ADS. After the acquisition, Alibaba will hold a 16.5% stake in Youku Tudou, while Yunfeng Capital will hold a 2% stake.

Alibaba's acquisition of Youku Tudou shares marks an important change in the Chinese Internet video industry. Alibaba will reportedly assign Lu Zhaoxi, chief executive officer of Alibaba, to join the board of directors of Youku Tudou. The two parties will work together to establish an Internet culture entertainment eco-system combining online and offline resources.

By April 25, Youku Tudou's share price was USD24.14 and its market value was USD4 billion. However, during the share purchase, Alibaba and Yunfeng Capital evaluated Youku Tudou at nearly USD6.6 billion. Stimulated by the deal, Youku Tudou's share price surged by 15% on April 28.

Gu Yongqiang, chairman and chief executive officer of Youku Tudou, said that the cooperation will help enhance Youku Tudou's service and user experience advantages in the Chinese Internet video platform sector. Meanwhile, Jack Ma, chairman of Alibaba Group, said this move will further expand Alibaba's eco-system advantage, so as to accelerate their development in the culture and digital entertainment industries.