What’s new: China’s market regulator has given the green light to the privatization of U.S.-listed Chinese search engine Sogou Inc. by Chinese internet giant Tencent Holdings Ltd., according to an announcement (link in Chinese) Tuesday.
The approval from the State Administration of Market Regulation marks a significant step for the deal. Sogou will become an indirectly wholly owned subsidiary of Tencent, and Sogou’s American depositary shares will be delisted from the New York Stock Exchange after the transaction is completed.
The details: Tencent currently holds a 39.2% stake in Sogou, while Sohu.com Ltd. has 33.8%. Sohu’s founder and CEO, Charles Zhang, owns 6.4%.
In July 2020, Tencent offered to buy out the rest of the combined 60.8% stake in Sogou for $9 per share, or $2.13 billion based on the number of shares outstanding. Sohu said two months later that Sogou had signed a deal to be privatized by Tencent, and Sohu would receive about $1.18 billion in cash from Tencent as part of the deal, which was expected to close in the fourth quarter of 2020.
The background: The approval comes as China is stepping up efforts to crack down on monopolies to enhance market fairness. On Sunday, regulators rejected the proposed merger of top Chinese game livestreamer Huya Inc. and its rival Douyu International Holdings Ltd., both of which are backed by Tencent.
Sogou controls 22% of China’s online search market, according to StatCounter, placing it in second place behind Baidu Inc.’s 66%. Last year, Sogou reported $924.7 million in revenue, down about 21% from a year earlier, with a net loss of 108.2 million.
Tencent’s shares closed up 3.9% to HK$555.5 on Tuesday.
Contact reporter Luo Meihan (meihanluo@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)
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