In a stock-for-stock merger, two top Chinese game livestreaming platforms, Huya and DouYu, will unite under the control of Tencent Holdings (HKEX: 0700). Thus concludes Tencent’s monthslong push of the deal began even before it assumed full ownership of Huya in an acquisition from Joyy Inc. (Nasdaq: YY).
According to the deal, each DouYu ADS will receive 0.73 American depositary shares of Huya, the companies said today. That represents a premium of 34.5% from DouYu’s Friday’s close of $14 per share.
In response to the announcement, Huya Inc.’s (NYSE: HUYA) shares tumbled 12% by midday Monday, to $22.60 apiece. The stock in DouYu (Nasdaq: DOYU) soared nearly 10%, to $15.33 per ADS.
So ends the competition between two of China’s largest gaming livestreaming companies. Both of the companies’ chief executives will now stand at the head of the giant, estimated by MobTech to hold a combined market share of 80% in China.
Reuters reported that Tencent will also integrate its gaming livestreaming platform Penguin into the merger for $500 million. After its recent deal with Joyy, the conglomerate took a stake of about 37% in Huya and had 50.9% of the voting power. In DouYu, it held approximately 38% of the voting power, according to various sources.
According to Statista, Tencent held 47.3% of China's mobile gaming market in 2018. It also remains the largest game publisher in the world, having under its full or partial control U.S.-based Riot Games (League of Legends), Epic Games (Fortnite), Bluehole (PUBG), and others, as listed by PCGamer's Steven Messner in an August report.
So, in a way, a gaming livestreaming monopoly seems an obvious next step for Tencent.
The merger of Huya and DouYu is expected to close in the first half of 2021.
Both Huya and DouYu will pay out dividends around the closing of the deal. Huya’s board has set aside $200 million, while DouYu has approved $60 million for dividends.
Separately, DouYu International Holdings Ltd. has updated its guidance for the third quarter, showing declined net revenue expectations. The company, which also positions itself as a “pioneer in the eSports value chain,” expects to generate 2,520 million yuan ($373.6 million) to 2,550 million yuan in the third trimester.
That would mean year-over-year growth of between 35.6% to 37.2%, DouYu said, though a decline from the 2,640 million yuan to 2,680 million yuan range announced previously.
In addition, the Wuhan-based company said it expects net income to decrease “significantly” from the second quarter, attributed to “revenue sharing fees and content cost.”