Baidu, Chinaâs equivalent of Google, said that it had received a nonbinding proposal to acquire its majority stake in the Chinese video streaming website Qiyi.com, valuing the business at about $ 2.8 billion.
Robin Yanhong Li, the Baidu chairman and chief executive, and Yu Gong, the chief executive of Qiyi, had offered to acquire the 80.5 percent stake in Qiyi owned by Baidu.
Qiyi, now known as iQiyi, started in 2010 with investments from Baidu and Providence Equity Partners. Baidu bought out Providenceâs stake for an undisclosed amount in 2012.
Baidu competes with Chinese rivals Alibaba and Tencent to invest in online-to-offline services, the sorts of businesses where the Chinese use smartphones to order everything from meals to massages brought to their homes. This has been an expensive undertaking, with Baidu operating profit for the quarter ended Sept. 30 falling by more than a third from a year ago in part because of rising costs.
The buyers would expect that Qiyi would remain a strategic partner after the transaction and enter into cooperation agreements with Baidu if the deal were consummated, Baidu said.
âThe board cautions Baiduâs shareholders and others considering trading in its securities that the board recently received the nonbinding proposal and no decisions have been made with respect to Baiduâs response to the proposal,â Baidu said in a news release.
âThere can be no assurance that any definitive offer will be made, that any legally binding agreement will be executed or that this or any other transaction will be approved or consummated,â Baidu added.
Such a transaction by a management-involved group for iQiyi would lighten Baiduâs burden in another expensive area: streaming video. Baidu competes with Alibaba, Tencent and other Chinese companies to create or buy movies and television shows â both foreign and domestic, with iQiyi showing a range of programs from Chinese costume dramas to American shows like âHomelandâ â that Chinese viewers stream through their smartphones, tablets and computers. Baidu has told investors it expects the costs of buying and producing content to continue to rise as a percentage of its income.
Baidu said its board of directors has formed a special committee of three independent directors to evaluate the transaction. The law firm Skadden, Arps, Slate, Meagher & Flom has been hired to advise the committee.