China’s Twitch-like service Huya agrees to buy Douyu to create a new entity worth $11b

Chinese game-streaming platform Huya has agreed to buy all the outstanding shares of its rival Douyu to create a new game-streaming giant.

According to Bloomberg, the new entity is valued at more than US$11 billion.

Photo credit: Huya

The board of directors of the two companies have unanimously approved the merger, which is expected to close during the first half of next year, according to a statement.

If the merger is completed, Huya CEO Rongjie Dong and Douyu CEO Shaojie Chen will be co-CEOs of the combined company.

Huya has agreed to pay US$200 million to its shareholders, while Douyu will pay its investors US$60 million within 20 days after the closing of the merger.

China’s tech giant Tencent, which is the biggest shareholder of Huya and also owns portions of Douyu stock, will take a 67.5% stake in the combined company, giving it control over the new entity. Meanwhile, Tencent will assign its interests in its gaming business Penguin Esports to the new entity for US$500 million.

According to Statista, China’s game-streaming market is expected to generate 23.6 billion yuan (US$3.5 billion) this year and is projected to exceed 34 billion yuan (US$5 billion) by 2022.

Huya and Douyu are the top two game-streaming platforms in China, together taking up about an 80% market share. The deal will help Tencent dominate the industry in the country.

Tencent’s gaming unit Tencent Games – home to popular titles such as Honor of Kings and League of Legends – saw US$5.3 billion in revenues in the first quarter of the year.

Currency converted from Chinese yuan to US dollar: US$1 = 6.76yuan.