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Chinese antitrust regulator blocks Tencent's $5.3 billion video games merger

Published Jul 09, 2021 10:28PM ET Updated Jul 10, 2021 04:25AM ET
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© Reuters. FILE PHOTO: A Tencent logo is seen at its booth at the 2020 China International Fair for Trade in Services (CIFTIS) in Beijing, China September 4, 2020. REUTERS/Tingshu Wang
 
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HONG KONG (Reuters) -China's market regulator on Saturday said it would block Tencent Holdings (OTC:TCEHY) Ltd's plan to merge the country's top two videogame streaming sites, Huya (NYSE:HUYA) and DouYu, on antitrust grounds.

Tencent first announced plans to merge Huya and DouYu last year in a tie-up designed to streamline its stakes in the firms, which were estimated by data firm MobTech to have an 80% slice of a market worth more than $3 billion and growing fast.

Tencent is Huya's biggest shareholder with 36.9% and also owns over a third of DouYu, with both firms listed in the United States, and worth a combined $5.3 billion in market value.

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

SAMR said Huya and DouYu's combined market share in the video game live streaming industry would be over 70% and their merger would strengthen Tencent's dominance in this market, given Tencent already has over 40% market share in the online games operations segment.

Huya and DouYu are ranked No. 1 and No. 2, respectively, as China's most popular video game streaming sites, where users flock to watch e-sports tournaments and follow professional gamers.

Tencent said in a statement it "will abide by the decision, comply with all regulatory requirements, operate in accordance with applicable laws and regulations, and fulfill our social responsibilities."

The deal termination comes amid an ongoing crackdown on Chinese tech companies from the government. Earlier this year, the anti-monopoly regulator placed a record $2.75 billion fine on e-commerce giant Alibaba (NYSE:BABA) for engaging in anti-competitive behaviour.

DouYu said it "fully respects the regulatory decision and actively cooperates with regulatory requirements to operate in compliance with applicable laws and regulations."

Huya did not immediately respond to a request for comment.

In a memo from SAMR published concurrently with the announcement, Zhang Chenying, a member of the state council's anti-trust committee, argued the deal would prevent fair competition.

"If Huya and DouYu are to merge, the original joint control of Douyu will become Tencent's complete control of a merged entity," Zhang wrote.

"Considering factors such as revenue, active users, livestreaming resources and other key indices, we can expect that a merger would eliminate or restrict fair competition."

Chinese antitrust regulator blocks Tencent's $5.3 billion video games merger
 

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Comments (1)
Wes Montgomery
Wes Montgomery Jul 10, 2021 6:44AM ET
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wow the commies take antitrust regulation more serious than US bizzaro world
Jul 10, 2021 6:44AM ET
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Putin makes money in Russia, Trump makes money. Of course the commies from CCP want to make money too. What is the better way to put pressure on the filthy rich's internet and gaming giants to cough up the money other than the governmental regulation?
Jessica Allen
Jessica Allen Jul 10, 2021 6:44AM ET
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when it comes to bitcoin mining, there is more profit in cloud mining,  you can ask me more
Limin Tandiono
Limin Tandiono Jul 10, 2021 6:44AM ET
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At least this round the dictator CCP is doing better than the western democracy to improve the welfare of the people.
 
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