YOUKU Inc and Tudou Holdings Co, China's top two online video websites, said yesterday shareholders have approved their merger.

Following the approval given at a shareholders' meeting yesterday, the two companies have officially formed a new entity called Youku Tudou Inc, they said in separate statements yesterday.

The new company will maintain the two brands independently as well as marketing and sales teams after the US$1.1 billion share swap deal closes in the third quarter.

Youku's shareholders will own 71.5 percent in the new company with Tudou's getting the balance. Tudou will be delisted after the completion of the deal although no specific timetable was given. Its founder and CEO Gary Wang will be a board member in the new entity.

The merger may consolidate the two firms' dominance in the market at a time when rivals such as Tencent's online video unit and Baidu's video joint venture iQiyi are upgrading high quality video content to attract viewers.

Together Yukou and Tudou take nearly one third of China's online video market in the first quarter by revenue, Beijing-based research firm Analysys International said.

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