UPDATE: In Line With Tencent Plans, Huya & DouYu Has Entered An Agreement To Merge

? Merger

• Chinese streaming platforms Huya (NYSE: HUYA) and DouYu (NASDAQ: DOYU), has entered an agreement to merge into a game-streaming giant with $11B market value – something Chinese gaming giant Tencent (HKG: 0700) planned for a while now, with initial news going back to this August

• Additionally, DouYu and Tencent have entered an agreement by which Tencent will assign its interest in-game live streaming brand Penguin e-Sports to DouYu for $500m, with plans for further integration of the business into the merged DouYu and Huya. This deal is expected to be closed about the same time as the merger

• Both Huya and DouYu boards of directors have approved the merger agreement

• In case of the successful deal, DouYu will become a wholly-owned subsidiary of Huya and delisted from The NASDAQ Global Select Market, becoming a privately-held company. СEOs of both companies will keep their positions, becoming co-CEOs of the combined entity

• Huya and DouYu has agreed to pay $200m and $60m of dividends, respectively, to their shareholders, no longer than 20 days after the closure of the merger deal

• It is estimated that upon the deal’s closure, Tencent will own about 67.5% of voting power in the combined company

• The deal is expected to close in the first half of 2021 and is subject to customary closing conditions

? Previous M&A Deals

• In August 2020, Tencent, through its wholly-owned subsidiary Image Frame Investment, acquired Leyou Technology for about $1.4B

• Equally in August, Tencent acquired the controlling stake in Guangzhou-based comic and animation studio Byment and a minority stake in hyper-casual mobile game publisher Voodoo

• In May 2020, Tencent, through its affiliate Image Frame Investment, acquired a 20.7% stake in Japanese PC/console game developer and publisher Marvelous for roughly $65m and became the largest shareholder

• In April 2020, Tencent acquired a 15.5% stake in Huya from social media platform JOYY for $262.6m in cash, boosting its voting stake from 34.6% (acquired two years ago) to 50.1% stake

? Products

• Tencent has stakes in some of China’s largest game streaming services, such as Huya Live, DouYu, Kuaishou and Bilibili

• Huya is the largest Chinese live streaming platform with 168.5 million MAU reported over the Q2, 2020 with e-sports as one of the largest parts of its content library

• DouYu is one of Chinese leading streaming platforms for PC and mobile and was one of the first to put a focus on e-sports streaming. The platform reported 165.3 million MAU over the Q2, 2020

SOURCES: SEC.GOV, GAMESINDUSTRY, ESPORTSOBSERVER, BLOOMBERG