Tencent completes merger with Chinese search engine Sogou

Sogou, a China-based search engine operator, said on Friday that it has completed its merger with Tencent in a deal worth US$3.5 billion to become a subsidiary of the Chinese tech giant, according to a statement.

Photo credit: Sogou

Sogou’s business and products will be absorbed into corresponding departments under Tencent’s platform and content group. However, Sogou’s search engine and input method products, which are its most popular offerings, will continue to operate under the Sogou brand, according to Tencent Technology, a media unit of Tencent.

Tencent had first sought to buy Sogou privately in July 2020, when the conglomerate signed an agreement to acquire all of Sogou’s outstanding shares that Tencent did not already own for US$9 apiece, or US$3.5 billion in total. The transaction was originally set to be completed in the fourth quarter of 2020 but was delayed because of regulatory screening.

Tencent has been Sogou’s second-largest shareholder since 2013, when the former paid US$448 million for a 36.5% stake in the Beijing-based business and merged it with its own search engine, Soso. Sohu, a media, video, and gaming business group, remained Sogou’s controlling shareholder with a 38.1% stake and maintained joint control of Sogou with Tencent, which held a 36.5% equity interest.

In July this year, the State Administration for Market Regulation fined Tencent US$77,000 for failing to report its acquisition of Sogou in 2013, but made it clear that the acquisition did not violate antitrust laws. A few days later, regulators approved the deal.

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As a result of the deal, Sohu received US$1.18 billion in cash from Sogou’s sale to Tencent and no longer holds any ownership interest in the company.

With the acquisition of Sogou, Tencent will be able to restart its search engine business. WeChat’s closed-looped content ecosystem and the search engine will now feed traffic to each other.

According to the latest numbers released by Statcounter, in August 2021, Baidu still ranked first among China’s search engine products, holding on to 76.7% of the market share. Sogou ranks second with 14.3% market share, while Bing and Google control only 3.6% and 2.4% of the market, respectively.

This report was first published on KrAsia.