Sina broke the news today that – according to an unnamed insider – Chinese entertainment company Shanda (NasdaqGS: SNDA) has just completed the acquisition of local Youtube clone Ku6. Ku6 is generally regarded as number 3 after Tudou and Youku among the Chinese video hosting companies. The price was not disclosed, according to the article.

If this is true, it would be fantastic news for the Chinese Internet market. Very little M&A activity has happened here in the past and its rather practice to conquer & destroy than partner & buy among local Web 2.0 companies. Even though experts claim Shanda has not done the best job in handling its other recent acquisitions such as digital entertainment company Hurray and online publishing platform QiDian, a purchase of Ku6 will also give a great boost to its competitors Tudou and Youku, who both have been rumored to be preparing an IPO for 2010.

We just recently published an interview with Ku6′s founder and CEO Kevin Li on our blog. The former Senior VP at Sohu had founded Ku6 only 3 years ago with investments from DFJ, DP Capital as well as Chinese search engine giant Baidu.

Update: Shanghai Daily reported later this afternoon that Shanda will acquire Ku6.com through a share swap through its listed subsidiary Hurray! Holdings. The deal is apparently valued at only US$44 million, which smells like a fire sale. The funding history of Ku6 is not entirely transparent but according to JLM Pacific Epoch the company had received US$ 10 million in their first round in 2007 and US$ 35 million in a Series B in the middle of last year.

Source: Breaking: Chinese entertainment company Shanda acquires local Youtube clone Ku6.com