Exclusive-Tencent plans to take U.S.-listed streaming firm DouYu private
-sources
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[January 27, 2022] By
Julie Zhu
(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, they said.
It is aiming to complete the deal this year, said one of the people.
Shares in DouYu, one of Tencent's main platforms for game marketing and
China's No. 2 videogame streaming site, surged on the news, jumping
12.7% in pre-market trade.
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 grounds.
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.
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That tension has not abated even after DouYu co-founder and co-CEO Zhang
Wenming, who had favoured 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 authorised 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.
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![](../images/012722pics/busine35.jpg)
People walk past a booth of live-streaming platform Douyu at the
ChinaJoy digital entertainment expo in Shanghai, China July 28,
2016. REUTERS/Stringer/File Photo
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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% 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 globally.
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 "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 approval 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 Refinitiv data.
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)
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