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Announcement:

Moody's sees no immediate rating impact from Baidu's $370 million acquisition of PPS

 The document has been translated in other languages

Global Credit Research - 08 May 2013

Hong Kong, May 08, 2013 -- Moody's Investors Service ("Moody's") says that Baidu Inc's announced acquisition of the online video business of leading internet video provider PPS for US$370 million on May 7 will have no impact on Baidu's A3 issuer and senior unsecured ratings.

The acquisition will position Baidu's iQiyi online video platform among the top few online video platforms in China.

The acquisition will be funded by internal cash flow, and will therefore only result in marginal changes in Baidu's key credit ratios.

"The acquisition of PPS is an extension of Baidu's move to raise its stake in iQiyi in November 2012, and will further enhance iQiyi's presence and user reach in the online media market," says Lina Choi, a Moody's Vice President and Senior Analyst.

PPS will bring over 100 million active monthly users and its expertise in peer-to-peer online media distribution, which is highly complementary to Baidu's web-based platform. PPS' user coverage in tier 3-4 cities will also provide a broader inventory base for advertizers, while iQiyi's user profile centers primarily on tier 1-2 cities.

"Following the merger of Youku and Tudou, the combination of iQiyi and PPS marks another significant step in online video market consolidation in China. As content, technology and user time converge among the top few players, the industry landscape should undergo increasing rationalization and profitability should improve over time," adds Choi, who is also the Lead Analyst for Baidu.

While Moody's sees no immediate rating impact from this acquisition on Baidu, the company has accelerated investments in its mobile and video segments in the past 12 months.

As shown in its 1Q 2013 operating results, margins experienced a 300-400 bps hit as content and other operating costs from iQiyi were fully consolidated.

Moody's further notes the dilutive impact of a growing online video business on Baidu's overall profitability, and will closely monitor future acquisitions.

The principal methodology used in this rating was Global Business & Consumer Service Industry Methodology published in October 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Founded in 2000, Baidu Inc. is the largest internet search service provider in China. The company generated RMB22.3 billion (approximately US$3.55 billion) in revenue in the 12 months ended December 2012. Mr Robin Li, the founder and current Chairman/CEO, directly and indirectly holds approximately 21% of the shares of Baidu and is the single largest shareholder.

Lina Choi
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's sees no immediate rating impact from Baidu's $370 million acquisition of PPS
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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