NEW YORK (
) - China's largest search engine
soared in Tuesday trading after announcing plans to acquire app maker 91 Wireless in a deal valued at $1.9 billion.
The transaction, which is expected to close in August, offers Beijing-based Baidu the opportunity to diversify away from its reliance on Internet searches. The company has faced issues monetizing web searches amid increased competition from its chief rival,
Baidu was gaining 4.5% to $106.17 to extend its 2013 advance to 5.8% though short of its 12-month high of $133.98 reached in August.
91 Wireless operates China's two largest Internet application markers, 91Assistant and HiMarket. 91 Wireless is China's fourth largest mobile-game distributor. More than 10 billion apps have been downloaded through HiMarket and 91Assistant in the past two-and-a-half years.
"We believe the acquisition is positive for Baidu's mobile Internet positioning as it fills up Baidu's mobile capability gap," wrote Jefferies analysts in a report led by Cynthia Meng.
Citibank analyst Muzhi Li projects that Baidu's revenue may increase 33% as a result of the acquisition, 3% higher than previous estimates. Citi upgraded Baidu to neutral, as did Jefferies. Citibank raised the Baidu's price target from $101.59 to $113.00. Jefferies, being optimistic, had previously held Baidu at $91.00 but rose the target to $115.00 following the announcement.
This acquisition would be Baudi's largest to date. In May, the company purchased Internet video provider PPS for $370 million. PPS was merged with Baidu's iQiyi video platform to form China's largest video provider. Baidu's second quarter earnings will be released on July 24th.
-- Written by Robert Arenella in New York
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