China’s Games Streaming Giants Huya and DouYu to Merge

China’s two largest games live streaming companies Huya and DouYu, both of which have U.S. share listings, are to merge. The deal was initiated by social media, games and streaming giant Tencent.

According to terms published on Monday, the shareholders of the two companies will come out roughly equal, and Huya will make an all stock offer for the shares of DouYu. Reuters calculates that DouYu is valued at $6 billion by the deal terms.

Huya CEO Dong Rongjie and his DouYu’s Chen Shaojie, will be co-CEOs of the combined company.

At the same time, it has also been agreed that Tencent will sell its own game live streaming business Penguin eSports for $500 million, after the Huya-DouYu deal is completed. That will enable a three-way consolidation of the sector.

Assuming that the deal receives regulatory approval and closes in the first half of 2021, the merged company will be a giant with some 300 million monthly active users, before overlapping subscriptions are eliminated. That could represent as much as 80% of the Chinese market. Tencent would have 67.5% voting control of the enlarged company.

The merger would be expected to help reduce the massive marketing costs associated with paying star gamers and winning new users. It would also help Tencent control more of the value chain in the games sector.

Tencent is already publisher in China of the mobile versions of “PUBG” and “Call of Duty,” and owner of share stakes in dozens of games firms in Asia, Europe and the U.S. Taking a dominant position in the gaming live streamers would allow Tencent to also capture more of the esports revenue being derived from its titles.

“Building on its success in game live streaming, Huya has also extended its content to other entertainment content genres. Huya’s open platform also functions as a marketplace for broadcasters and talent agencies to congregate and closely collaborate,” Huya explains.

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