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China's Baidu moves into smartphone apps with £1.25bn acquisition

China's largest Internet search engine company Baidu is paying a total of $1.9 billion (£1.25 billion) to acquire a major developer of mobile app stores in China.

The deal will see Baidu take over 91 Wireless, owned by NetDragon Websoft, a company listed in Hong Kong.

The move will allow Baidu to expand on its search offering and better compete against online Chinese rivals Alibaba and Tencent.

Baidu said it will pay $1.09bn for a 57.4 per cent stake in 91 Wireless, which which was established in 2007 and operates two smartphone app stores in China - 91 Assistant and HiMarket. The company also develops its own apps.

In addition, Baidu will offer $800m to the owners of the remaining 42.6 per cent stake, who have not been named.

To date, says NetDragon, over 10 billion apps have been downloaded from 91's app stores. Acccording to an iResearch 2011-2012 report, 91 Wireless is the number one third party apps distribution platform in China, by both active users and accumulated downloads.

"NetDragon believes that there is huge potential for Baidu and 91 Wireless’s long-term cooperation, and they can be well-positioned to achieve greater prominence in the mobile internet market through this acquisition," said the company.

"NetDragon and Baidu will explore opportunities to further cooperate on other businesses," it added.

Earlier this week, China's online literature company Cloudary pulled out of a long planned US IPO, "citing market conditions".