China’s leading search engine company, Baidu.com Inc. (ADR) (NASDAQ: BIDU) announced on Tuesday that it has entered in a preliminary deal with NetDragon to acquire China’s major app store developer, 91 wireless in deal worth $1.9 billion.
The deal is expected to help Baidu.com to increase its traction in ever-changing and highly competitive mobile internet market in mainland China. The deal will allow Baidu.com to spread out its business. With 91 Wireless’ acquisition, the company will further broaden its horizon beyond search engine business; besides it will also be able to compete with other big names in Chinese internet market such as Alibaba and Tencent.
The proposed acquisition will be the biggest ever for Baidu.com.
The Chinese internet market has seen some major deals in the recent past.
Earlier in May, Baidu.com entered in an acquisition deal estimated at $370 with PPStream. Just a week earlier, Alibaba announced that it would pay $586 million to acquire 18% stake in microblogging service, Weibo, (just like Twitter). Sina Corporation has majority stake in Weibo.
According to the terms of the deal, Baidu will pay NetDragon $1.09 for 57.4% stake in 91 Wireless and for remainder stake it will offer $800 million to other shareholders. Both Companies will have to decide until August 14 whether to proceed with the deal.
Speaking to CNBC over the deal, Elinor Leung, an analyst with CLSA Hong Kong said, “It’s good for Baidu because if you look at mobile, currently apps are more popular than mobile sites because Internet download speeds are slow. So with the acquisition of this appstore, Baidu can work more closely with the apps developer and be able to enhance further their search capabilities.”
According to a research firm, Analysys International, the mobile internet market is expected to double; about 300 billion yuan in 2014 from 150 billion yuan in 2012. Besides, the number of active mobile internet users is expected to rise to 749 million from 521 million in the same period.
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