REUTERS/Jason Lee
The company, China's answer to Google, has agreed to buy out 91 Wireless, which develops apps for Android phones as well as running its own app store.
The deal marks an aggressive investment into mobile from Baidu, in what is now the world's largest smartphone market. The Nasdaq-listed company dominates web searches in China but is seen as needing to branch out into mobile to continue to grow, as users increasingly access the internet from smartphones.
The price paid is unprecedented for an internet company in China, underlining the strength of the country's rapidly growing technology sector. 213m smartphones were sold in China last year, and 78m were shipped in the first quarter of 2013 alone - a 117% rise - according to research from IDC.
91 Wireless is majority owned by NetDragon Websoft, the Hong Kong listed firm. The company said today it had accepted a $1.09bn bid for its 57pc stake. Baidu has offered the same terms to 91 Wireless's other shareholders.
The millions of Android smartphones in China are not connected to Google's Play Store, leaving other providers to plug the gap. More than 10bn apps have been downloaded from 91 Wireless's platforms, Baidu said in a statement today.
Baidu was the first company to float on New York's Nasdaq index in 2007, and is now valued at $35.5bn. It has cashed in on Google's partial withdrawal from China in 2010, when the web giant clashed with authorities over censorship. However, the company is seeing competition hot up, with internet rivals such as Alibaba and Tencent also investing heavily.
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