Yes We Can: Tudou Urges Shareholders to Vote For Merger With Youku

Chinese video-streaming site Tudou (NASDAQ:TUDO) has just revealed the next steps in its proposed merger with larger rival Youku (NYSE:YOKU). That merger plan, first made public in March of this year, will require being voted upon by Tudou shareholders, and then if approved will eventually see Tudou delisted from NASDAQ and fully merged into Youku Tudou Inc. – presumably under the $YOKU ticker that the larger company already has.

That Tudou vote will take place at its 2012 annual general meeting of shareholders in Hong Kong on August 20th. The announcement from Tudou today, shortly after American markets opened for Wednesday trading, points out:

[Tudou’s] board of directors has unanimously approved the Merger Agreement and recommends that holders of its ordinary shares and ADSs vote “FOR” the resolution.

In tandem with all this, Youku has filed a “preliminary joint proxy statement” with the US SEC (see it here), that outlines the details. Amongst a barrage of whats and ifs, the prospectus points out that Youku shareholders will need to vote on this issue at some point, as well as on the legal name change to Youku Tudou Inc. Youku’s AGM date has not yet been set.

Jumping to page 62 of the mammoth SEC filing, we see a list of “risk factors” involved in the merger, such as prohibitive “transaction and integration costs.” This being China, there’s always a fear of government clampdowns and other new regulations, which the Youku prospectus does allude to with reference to SARFT, China’s media regulator:

Tudou may be unable to renew its SARFT license in 2014 and may be unable to conduct its business if its SARFT license is revoked or not renewed. […] If the PRC government determines that the contractual arrangements that establish the structure for operating Tudou’s businesses do not comply with applicable PRC laws and regulations or if Tudou is found to be in violation of any existing or future PRC laws or regulations, Tudou could be subject to severe penalties and may be forced to discontinue all or a portion of its business.

Indeed, we know that SARFT will soon move to regulate – and probably outlaw certain elements of – online video content, which will pose a big risk to all of China’s numerous video-streaming sites which have previously enjoyed relative freedom in their screening of entertainment shows and movies.