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Esports Platforms Huya, Douyu To Merge: What Investors Should Know

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Esports Platforms Huya, Douyu To Merge: What Investors Should Know

Two large Chinese video game streaming companies agreed to a merger Monday. 

What Happened: Huya Inc (NYSE: HUYA) and DouYu International (NASDAQ: DOYU) announced a merger agreement Monday. The deal comes after pressure from Tencent Holdings Ltd (Pink: TCEHY) for the companies to merge.

Huya will acquire all outstanding Douyu shares, including American depository shares. Each Douyu ADS will receive .730 Huya ADSs representing one Huya Class A share.

Joyy Inc (NASDAQ: YY), a large shareholder in Huya, provided written consent for the merger deal.

Huya will pay $200 million in cash dividends to shareholders around the closing date of the merger.

If the merger is completed, each company will hold around 50% of the combined entity. The deal is expected to close in the first half of 2021.

Why It’s Important: Tencent has pushed for a merger of the two companies for months. Tencent had stakes in both companies and will own 67.5% voting power in the new combined company.

Tencent bought stakes in Huya from Joyy and Huya CEO Doug Rongjie.

Tencent said it will assign its interest in Penguin e-Sports — a streaming rival to the two merging companies — to Douyu prior to the merger.

Large User Base: In the second quarter, Huya reported a 34% increase in revenue to $381.8 million. The company had 75.6 million mobile monthly active users, good for growth of 35% year-over-year.

The company had total MAUs of 168.5 million for year-over-year growth of 17.1%. Huya reported paying users of 6.2 million, year-over-yar growth of 26.5%.

Douyu reported revenue growth of 33.9% to $354.4 million in the second quarter. The company reported 58.4 million mobile MAUs and year-over-year growth of 15.4%. Total MAUs in the second quarter were 165.3 million. Paying users grew 13.4% year-over-year to 7.6 million.

Together, the two companies will have a large user base and constitute a major player in the livestreaming market, which has grown rapidly in China.

The companies compete with Bilibili (NASDAQ: BILI), which reported 172 million MAUs in the second quarter. Bilibili had 12.9 million paying users.

While Huya and Douyu compete mainly in gaming streaming, Bilibili appeals to a wider range of audience with other topics.

All three companies ultimately compete for time spent on the platform, and the merger could give Tencent’s streaming efforts a major push. Tencent is a small shareholder in Bilibili as well. 

What’s Next: Together, the two streamers could have a combined audience of 300 million MAUs depending on how much overlap there is between the platforms' users.

HUYA, DOYU Price Action: Huya shares were down 9.25% at $23.40 at last check Monday, while Douyu shares were trading 13.54% higher at $15.90. 

 

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