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Tencent's $5.3bln Video Games Merger Blocked By China’s Antitrust Regulator

Tencent's $5.3bln Video Games Merger Blocked By China’s Antitrust Regulator
The proposed merger of the top two videogame streaming sites of China - Huya and DouYu, which was being pursued by the Chinese etch giant Tencent Holdings Ltd, has been stopped by the market regulator of China over antitrust concerns. 
The announcement to merge Huya and DouYu was first announced by Tencent last year with the company planning the merger to streamline its stakes in the companies. According to  data firm MobTech, the estimated market share of the two companies was more than 80 per cent and it was worth more than $3 billion while also noting that their market share was growing fast.
With ownership of 36.9 per cent of its stocks, Tencent is the largest shareholder of Huya's. And more than one third of the total stocks of DouYu are also owned by Tencent. Both the companies – Huya and DouYu, are listed in the United States. The combined market value of the two companies is about $5.3 billion.
The decision not to allow the merger was taken by China’s State Administration of Market Regulation (SAMR) after closely reviewing the additional concessions for the merger as proposed by Tencent, the regulator said.
The combined market share of Huya and DouYu would be more than 70 per cent in the Chinese video game live streaming industry and Tencent’s dominance in the market would be further strengthened in the market by the merger, SAMR said. It also noted that more than 40 per cent of the online games operations segment is already owned by Tencent.
Huya and DouYu are the two most popular video game streaming sites in China and there is a large following of users to watch the e-sports tournaments aired on the platforms and where users also follow professional online video gamers.
It "will abide by the decision, comply with all regulatory requirements, operate in accordance with applicable laws and regulations, and fulfill our social responsibilities," Tencent said in a statement.
This move by the Chinese regulator to stop the proposed merger also reflects the intent of Chinese authorities to strongly implement its ongoing crackdown on Chinese tech companies and to address market domination and monopoly practices in particular. A record $2.75 billion fine on the Chinese e-commerce giant Alibaba was imposed by the anti-monopoly regulator of China over alleged anti-competitive behaviour and practices followed by the tech giant.
There were no comments on the regulator’s decision available from Huya and DouYu.

Christopher J. Mitchell

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