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The top two online-video sites in China, Youku and Tudou, are merging into one super-company that will be called Youku Tudou Inc. The YouTube-esque companies are traded on the NADSAQ as YOKU and TUDO, and will retain separate brand identities.

The deal, worth around $1 billion, has already caused the two stocks to skyrocket. Tudou‘s stock was up around 155 percent, and Youku was up 28 percent.

Youku, the No. 1 video service in China, and Todou, the No. 2 company, have been battling each other for online-video traffic in China, and recently their weapon of choice has been copyright lawsuits. The companies have been going back and forth, accusing each other of posting the competitor’s content and violating copyright laws. Lawyer fees are just one of the major ways the companies will save money by no longer being in competition. They will be able to combine bandwidth costs.

Online video is a booming market in China, with $234 million in revenue in Q4, PaidContent reports. Youku accounts for 25.3 percent of the space’s revenue and Toudu 14.5 percent.

“When the strategic combination is complete, Tudou will retain its distinct brand identity and platform in Youku Tudou Inc., strengthening and complementing Youku’s video business,” said Youku founder and CEO Victor Koo.

The merger will be a 100 percent stock-for-stock transaction and is expected to be completed by the end of Q3 2012.

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