Identifying Possible Chinese Takeovers And Mergers

by: Adam Alvarez

With the number of Chinese internet companies still small in number, now marks the perfect time for a company to take advantage of and dominate a particular landscape. Whether through aggressive spending or takeovers, these companies are ready to establish themselves as top tier corporations.

First to the task was Youku (NYSE:YOKU) with its recent announcement of acquiring Tudou Holdings (NASDAQ:TUDO). The deemed Chinese version of "Youtube" made the logical move in taking over its main, and really only, competitor. Now, instead of having a dreaded and costly battle, the combined entity-- Youku Tudou-- will be left to dominate and dig deeper into a vast industry that it controls.

The foreseen positives for both companies was the main reason each company's stock did so well following the news. Youku's shares gained 27% while Tudou's shares surged over 150%. The very positive reaction in both company's shares only shows the confidence investors have in the success of such a deal, and the very promising end result.

So if this deal turns out to be a rousing success, which it appears it will be, the belief others will soon follow is well supported. The only question remains which companies will do the buying and which will be getting bought.


  1. Baidu (NASDAQ:BIDU): Stacked with everything in its favor, including market share and earnings, the company's main focus from here will undoubtedly be on expansion. A focus that is sure to be on the minds of leadership as passing on a good deal now could be damaging to the pristine business model down the road.
  2. (NASDAQ:SOHU): After falling subject to an awful earning's report last month, the company is in desperate need of bringing back a business model that proved successful until late last year.
  3. Sina (NASDAQ:SINA): Much like, the company has experienced a sizable downfall in share price this past year and finds itself needing to assure investors of its still lofty valuation. After all, taking a chance with an acquisition makes more sense than risking further question marks regarding the company's future.

Takeover Targets

  1. (NASDAQ:DATE): With internet access still in its early stages in China, it's no surprise that the nation's largest online dating website has had a tough year as far as share price goes. Trading at all time lows, but posting positive EPS readings and engaged in a market that may gain traction in coming years, the company could entice a handful of suitors in coming months.
  2. Renren (NYSE:RENN): After surging in late January on news that Facebook (NASDAQ:FB) was coming to market, the company's position once the buzz settles is still very much up in the air. Also the subject of constant question marks regarding government censorship, the social networking website may receive a few offers from companies willing to take on the aforementioned risk. If those offers do come to the table, it would be hard to imagine Renren turning them down.
  3. Dangdang (NYSE:DANG): With the earnings losses offset only by revenue growth and a share price that has been in almost constant retraction since coming to market in late 2010, Dangdang has all the makings of a startup company just tapping into the market. Deemed the "Amazon" of China and spending heavily to expand its core business, the company marks a perfect takeover target for any bidder willing to overlook a few rough quarters en route to a prosperous future.

Disclosure: I am long DANG.

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