Consortium withdraws $2.3bn iQiyi offer

A consortium led by the boss of Chinese search conglom Baidu has dropped its US$2.3 billion offer to acquire 80.5% of compatriot on-demand player iQiyi.

Baidu chairman and CEO Robin Yanhong Li and Qiyi.com chief exec Yu Gong fronted a special committee’s offer to acquire the business from Baidu back in February.

They have now released a statement saying the parties have “not been able to reach an agreement on transaction structure and purchase price”.

A deal, which would have handed the consortium all outstanding shares in iQiyi and valued the firm at US$2.8 billion, will therefore not go forwards. iQiyi will, however, remain a “key strategic partner” for Baidu, the statement noted.

According to various sources, the proposed deal had concerned iQiyi investors, who saw the offer as undervalued.

The China Money Network website last week reported on a letter to Li from New York hedge fund Acacia Partners, which owns US$400 million worth of Baidu shares. This criticised the deal on multiple fronts, while citing research that suggested Qiyi’s true value was around US$5.8 billion.

The Wall Street Journal cited a source claiming that this hadn’t led to the offer withdrawal, and that Li would only have owned 20% and would not have had voting control.

Baidu and former Hulu stakeholder Providence Equity Partners launched iQiyi in 2010. It had ten million subscribers as of 2015, more than twice as many as rivals Tencent and Youku Tudou.