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Chinese antitrust regulator blocks Tencent’s $ 5.3 billion video game merger by Reuters




© Reuters. FILE PHOTO: A Tencent logo seen at its booth at China International Trade Fair 2020 (CIFTIS) in Beijing, China, September 4, 2020. REUTERS / Tingshu Wang

HONG KONG (Reuters) – China’s market regulator on Saturday said it would block Tencent Holdings (OTC 🙂 Ltd’s plan to merge the country’s two largest video game streaming sites, Huya (NYSE 🙂 and DouYu, on antitrust grounds.

Tencent first announced plans to merge Huya and DouYu last year in a merger designed to streamline its holdings in the companies, which were estimated by computer firm MobTech to have an 80% slice of a market worth more than $ 3 billion. Dollars and grew rapidly.

Tencent is Huya̵

7;s largest shareholder with 36.9% and also owns over a third of DouYu, with both companies listed in the US, and with a total value of $ 5.3 billion in market value.

Reuters first reported that the State Administration of Market Regulation (SAMR) had plans to block trading on Monday, which came after the regulator reviewed further concessions that Tencent had proposed 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, as Tencent already has over 40% market share in online gaming operations.

Huya and DouYu are No. 1 and No. 2, respectively, as China’s most popular streaming video sites, with users streaming to watch e-sports tournaments and follow professional players.

Tencent said in a statement that it “will comply with the decision, comply with all legal requirements, act in accordance with applicable laws and regulations and fulfill our social responsibility.”

The termination of the agreement comes amid an ongoing breakdown of Chinese technology companies by the government. Earlier this year, the antitrust regulator imposed a record $ 2.75 billion fine on the e-commerce giant Alibaba (NYSE 🙂 to engage in anti-competitive behavior.

DouYu said it “fully respects the legislative decision and actively cooperates with regulatory requirements to operate in accordance with applicable laws and regulations.”

Huya did not immediately respond to a request for comment.

In a note from SAMR published at the same time as the announcement, Zhang Chenying, a member of the State Antitrust Committee, claimed that the agreement would prevent fair competition.

“If Huya and DouYu are to merge, the original joint control of Douyu will become Tencent’s full control of a merged entity,” Zhang wrote.

“Given factors such as revenue, active users, livestreaming resources and other key indices, we can expect a merger to eliminate or limit fair competition.”

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