Tencent faces concessions to win green light for giant videogaming merger

Tencent is having to offer concessions in a plan to merge the country's top two videogame live-streaming sites in order to resolve antitrust concerns, people with knowledge of the matters said

By Pei Li, Kane Wu and Yingzhi Yang

(Reuters) - Chinese internet giant Tencent Holdings Ltd is having to offer concessions in a plan to merge the country's top two videogame live-streaming sites in order to resolve antitrust concerns, two people with knowledge of the matter told Reuters.

Tencent, China's No. 1 videogame and social media firm, first announced plans to merge Huya and DouYu last year in a tieup designed to streamline its stakes in the firms, estimated by data firm MobTech to have an 80% slice of a market already worth more than $3 billion and growing fast.

But with regulators concerned the deal would give Tencent overwhelming dominance, it's willing to settle for approval subject to conditions, according to the people, who declined to be named due to the sensitivity of the matter.

China's State Administration of Market Regulation (SAMR) said in December it was reviewing the merger.

Tencent, Huya, DouYu and SAMR did not immediately respond to Reuters' requests for comment.

The change of tack comes amid Beijing's sweeping anti-monopoly crackdown on China's internet giants. The crackdown started with 2020's shelving of financial technology firm Ant Group's $37 billion initial public offering, and has expanded across the sector, battering share prices and prompting some to take pre-emptive measures before they are targeted.

A separate person with direct knowledge of the deal said the antitrust review of the merger had been an "elongated process", but nothing concrete had been communicated from the regulator to the companies regarding potential concessions.

Huya and DouYu are ranked No. 1 and No. 2, respectively, as China's most popular video game streaming sites, where users flock to watch e-sports tournaments and follow professional gamers. Tencent is Huya's biggest shareholder with 36.9% and also owns over a third of DouYu, with both firms listed in the United States, and worth a combined $10 billion by market value.

"Tencent has a dominant position in game publishing in China, while the two live-streaming sites combined would be tantamount to gargantuan in the business," one of the people with knowledge of the matter told Reuters.

Announcing the Huya-DouYu plan last October, Tencent said it aimed to fold its own fully-owned videogame live-streaming business into the combined businesses of Huya and DouYu after the merger under its Penguin arm.

This has, however, triggered concerns, said the people familiar with the matter. Tencent requires user-agreement that company-owned games cannot be live-streamed on other platforms without its approval.

The Chinese tech giant had been using this requirement to block competitors, such as ByteDance, which is making a foray into gaming scene, from using content for which Tencent owns intellectual property.

 

(Reporting by Pei Li, Yingzhi Yang, Kane Wu; additional reporting by Cheng Leng; Editing by Sumeet Chatterjee and Kenneth Maxwell)