What’s new: Tencent Holdings Ltd. offered to buy out the 60.8% of search engine Sogou Inc. that it doesn’t already own for $9 a share, or $2.13 billion, based on the number of shares outstanding, Sogou parent Sohu.com Ltd. said.
Sohu said its board has not yet had an opportunity to review and evaluate Tencent’s preliminary nonbinding proposal or to make any determination as to how to respond.
If completed, the transaction would result in Sogou becoming a privately held, indirectly wholly owned subsidiary of Tencent, and Sogou’s American depositary shares would be delisted from the New York Stock Exchange, Sohu said.
Sogou’s shares surged Monday 48% to $8.51, still well below the initial public offering price of $13 per ADS in 2017. The company’s market capitalization rose to $3.3 billion. Sohu’s shares jumped nearly 40% to $15.55 Monday.
The background: Tencent already holds 39.2% of Sogou, while Sohu has 33.8%. Sohu’s founder and Chief Executive Officer Charles Zhang owns 6.4%. Sohu and Zhang together control 45% of Sogou’s voting power, while Tencent has 52.3%.
Sogou collaborates extensively with Tencent as the default general search engine in various Tencent products. About 35% of Sogou’s total search traffic measured by page views came from Tencent users in December 2019, according to Sogou’s annual report.
Sogou controls 22% of China’s online search market, according to StatCounter, placing it in second place behind Baidu’s 66%.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)
