Jan 27 (Reuters) - Tencent Holdings Ltd plans to
take DouYu International Holdings Ltd private amid
disagreements over strategy among executives at the Chinese
videogame streaming firm, two people with direct knowledge of
the matter said.
Tencent, the biggest shareholder in Nasdaq-listed DouYu with
a 37% stake, wants to team up with at least one private equity
firm for the deal and is currently talking to investment banks,
It is aiming to complete the deal this year, said one of the
Shares in DouYu, one of Tencent's main platforms for game
marketing and China's No. 2 videogame streaming site, surged as
much as 17.6% on the news, closing 14% higher on Thursday.
The company has been debating its business strategy after
Tencent's plans to merge it with bigger rival Huya Inc
were blocked by regulators in July last year on antitrust
There have been differences among DouYu executives over
whether to stick with game livestreaming as its core business or
shift towards more profitable entertainment livestreaming, said
the other person.
That tension has not abated even after DouYu co-founder and
co-CEO Zhang Wenming, who had favored diversifying revenue
streams, resigned last month, the person added. DouYu has said
Zhang's departure was due to personal reasons. Co-founder Chen
Shaojie now runs the company.
The take-private plans reflect Tencent's desire to have a
firm grip on its core gaming affiliates at a time when it faces
a raft of regulatory issues, said the people, who were not
authorized to speak on the matter and declined to be identified.
A 60% slide in DouYu's stock price since July, giving it a
market value of $717 million on Wednesday, has also meant it is
attractively priced for a take-private deal, they added.
Tencent and DouYu declined to comment. Zhang and Chen did
not immediately respond to a request for comment made via DouYu.
Tencent, owner of hit games "Honor of Kings" and "PUBG
Mobile," has like other Chinese internet firms been grappling
with a regulatory crackdown on the sector and in the third
quarter posted revenue growth of just 13% https://www.reuters.com/business/media-telecom/tencent-reports-3-jump-third-quarter-profit-beating-expectations-2021-11-10
-its slowest since it went public in 2004.
In addition to the blocking of the DouYu-Huya deal, it has
also had to contend with efforts by authorities to rein in
gaming by minors, while curbs on other industries have also
dampened advertising appetite.
At the same time, competition is growing both at home and
ByteDance, owner of Douyin, the domestic version of Tiktok,
and which also has a games unit, has made sizeable inroads into
the video games business. Microsoft Corp last week said
it would acquire https://www.reuters.com/technology/microsoft-buy-activision-blizzard-deal-687-billion-2022-01-18
"Call of Duty" maker Activision Blizzard for $68.7
billion in cash - the biggest gaming industry deal in history.
New rules in the offing from China's cyberspace regulator
will also require the nation's big internet companies to seek
for new investments and fundraising, sources have told Reuters.
The regulator has denied issuing a document to that effect.
"In such a challenging regulatory and competitive
environment, it is becoming more important for Tencent to
strengthen the control of existing gaming-related portfolio
companies such as DouYu," said the second person.
There have been some $13.7 billion in take-private deals for
U.S.-listed Chinese companies over the past two years, compared
to a combined $5.8 billion for 2018 and 2019, according to
Undervalued shares and increased scrutiny by U.S. regulators
have often been cited as reasons for the deals. The average
premiums paid by buyers jumped to 53% last year from 36% in
2020, the data showed.
(Reporting by Julie Zhu; Editing by Edwina Gibbs)