Tencent’s $ 5.3 billion video game merger blocked by Chinese competition regulator

China’s market regulator said on Saturday it would block Tencent Holdings Ltd’s plan to merge the country’s two main video game streaming sites, Huya and DouYu, on antitrust grounds.

Tencent first announced plans to merge Huya and DouYu last year as part of a merger to streamline its stakes in companies, which were estimated by data firm MobTech to have an 80% share a market worth over $ 3 billion and growing rapidly.

Tencent is Huya’s largest shareholder with 36.9% and also owns more than a third of DouYu, with the two companies listed in the United States, with a combined market value of $ 5.3 billion.

Reuters first announced the State Administration of Market Regulation (SAMR) plan to block the deal on Monday, after the regulator considered additional concessions proposed by Tencent for the merger.

SAMR said that the combined market share of Huya and DouYu in the live video game streaming industry will be over 70% and their merger will strengthen Tencent’s dominance in this market, as Tencent already owns more than 70%. 40% market share in the online gaming operations segment.

Huya and DouYu are ranked # 1 and # 2, respectively, among China’s most popular video game streaming sites, where users flock to watch esports tournaments and follow professional players.

Tencent said in a statement that it “will comply with the ruling, comply with all regulatory requirements, operate in accordance with applicable laws and regulations, and fulfill our social responsibilities.”

The termination of the deal comes amid a continued government crackdown on Chinese tech companies. Earlier this year, the anti-monopoly regulator imposed a record fine of $ 2.75 billion on e-commerce giant Alibaba for engaging in anti-competitive behavior.

Huya and DouYu did not immediately respond to requests for comment on the SAMR decision.

In a SAMR memo released alongside the announcement, Zhang Chenying, a member of the State Council’s antitrust committee, argued that the deal would prevent fair competition.

“If Huya and DouYu merge, the original joint control of Douyu will become the full control of Tencent of a merged entity,” Zhang wrote.

“Considering factors such as revenues, active users, live streaming resources, and other key indices, we can expect a merger to eliminate or restrict fair competition.”

© Thomson Reuters 2021


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