Tencent proposes merger of Chinese Twitch-like platforms Huya and Douyu

Tencent Holdings is proposing a merger between Chinese Twitch-like services Huya and Douyu, a deal that’s expected to form a game-streaming major worth over US$10 billion.

Photo credit: Tencent

Huya and Douyu said in separate statements on Monday that they have received a letter from Tencent proposing a stock-for-stock merger between the two platforms.

According to the letter, Huya or its subsidiary would acquire each outstanding ordinary share of Douyu as a result of the proposed transaction.

Huya noted that it’s still considering the proposal and no decisions have been made, while its rival Douyu said that it plans to “review and evaluate” the proposed deal.

Tencent has a 36.9% stake and voting power of 50.9% in Huya. It’s also the largest shareholder of Douyu with a 38% stake.

Tencent has also entered into a share transfer agreement with Joyy, Huya’s parent company, to buy 30 million class B shares of Huya for US$810 million in cash. It will also buy 1 million class B shares from Huya CEO Rongjie Dong. Upon the completion of the agreement on or before September 9, Tencent will increase its stake in Huya to 51% and voting power to 70.4%.

China’s esports industry has grown rapidly, with US$10.3 billion in revenues and 484 million users recorded in the first half of this year, according to the China Game Industry Research Institute.

See also: Tencent’s “dog-eat-dog” gaming empire

Huya and Douyu are the top two game-streaming platforms in China, together taking up about an 80% market share. Tencent has been reportedly pushing for the merger of the two companies for months. If the proposed deal materializes, the new entity, which Tencent reportedly seeks to take control of, could help Tencent dominate the game-streaming industry and fend off rivals such as ByteDance.

Tencent’s gaming unit Tencent Games is home to popular titles such as Honor of Kings, PUBG Mobile, and League of Legends. It saw US$5.3 billion in revenues in the first quarter, representing a 31% year-on-year growth.