China's Tencent faces concessions to win green light for giant videogaming merger -sources

DouYu International Holdings

23/03/2021 05:24

* Anti-trust concerns amid Beijing crackdown on internet
giants
    * Plan to merge Huya, DouYu, firms with estimated 80% market
share
    * Tencent willing to accept conditional approval for deal
-sources
    * Market regulator SAMR said in Dec it was reviewing merger
plan

    By Pei Li, Kane Wu and Yingzhi Yang
    March 23 (Reuters) - Chinese internet giant Tencent Holdings
Ltd  0700.HK  is having to offer concessions in a plan to merge
the country's top two videogame live-streaming sites in order to
resolve antitrust concerns, two people with knowledge of the
matter told Reuters.
    Tencent, China's No. 1 videogame and social media firm, 
first announced plans to merge Huya  HUYA.N  and DouYu  DOYU.O 
last year in a tieup designed to streamline its stakes in the
firms, estimated by data firm MobTech to have an 80% slice of a
market already worth more than $3 billion and growing fast.
    But with regulators concerned the deal would give Tencent
overwhelming dominance, it's willing to settle for approval
subject to conditions, according to the people, who declined to
be named due to the sensitivity of the matter. 
    China's State Administration of Market Regulation (SAMR)
said in December it was reviewing the merger.  urn:newsml:reuters.com:*:nB9N2HA007
    Tencent, Huya, DouYu and SAMR did not immediately respond to
Reuters' requests for comment.
    The change of tack comes amid Beijing's sweeping
anti-monopoly crackdown on China's internet giants. The
crackdown started with 2020's shelving of financial technology
firm Ant Group's $37 billion initial public offering, and has
expanded across the sector, battering share prices and prompting
some to take pre-emptive measures before they are targeted.
 urn:newsml:reuters.com:*:nL1N2LG0J4
    A separate person with direct knowledge of the deal said the
antitrust review of the merger had been an "elongated process",
but nothing concrete had been communicated from the regulator to
the companies regarding potential concessions.   
    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 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 $10 billion by market value.
    "Tencent has a dominant position in game publishing in
China, while the two live-streaming sites combined would be
tantamount to gargantuan in the business," one of the people
with knowledge of the matter told Reuters.
    Announcing the Huya-DouYu plan last October, Tencent said it
aimed to fold its own fully-owned videogame live-streaming
business into the combined businesses of Huya and DouYu after
the merger under its Penguin arm. 
    This has, however, triggered concerns, said the people
familiar with the matter. Tencent requires user-agreement that
company-owned games cannot be live-streamed on other platforms
without its approval. 
    The Chinese tech giant had been using this requirement to
block competitors, such as ByteDance, which is making a foray
into gaming scene, from using content for which Tencent owns
intellectual property.

 (Reporting by Pei Li, Yingzhi Yang, Kane Wu; additional
reporting by Cheng Leng; Editing by Sumeet Chatterjee and
Kenneth Maxwell)
 ((Pei.Li@thomsonreuters.com; +852 64325868;))