Tencent, the biggest shareholder in Nasdaq-listed DouYu with
a 37 percent 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 as much as 17.6 percent
on the news, closing 14 percent higher on Thursday.
The company has been debating its business strategy after
Tencent's plans to merge it with bigger rival Huya 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.
Tencent Fires 70 Staff, Blacklists 13 Firms in Anti-Graft
Campaign
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 percent 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 percent, 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 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.
Undervalued shares and increased scrutiny by US regulators
have often been cited as reasons for the deals. The average premiums paid by
buyers jumped to 53 percent last year from 36 percent in 2020, the data showed.
© Reuters
0 comments:
Post a Comment