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China’s DouYu Kills Deal With Huya in Blow to Tencent

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·2 min read
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(Bloomberg) -- DouYu International Holdings Ltd. has terminated a merger with rival Huya Inc., formally nixing a deal that would have helped cement Tencent Holdings Ltd.’s lead in video game-streaming.

DouYu announced its withdrawal after regulators rejected the deal over the weekend, saying it would strengthen Tencent’s dominance in Chinese game streaming and give it an anti-competitive edge. Huya and DouYu together control more than 80% of the market based on active users, the State Administration for Market Regulation said in a statement Saturday.

The case marks the antitrust agency’s first rejection of mergers and investment deals by China’s internet companies. It deals a blow to Tencent, a shareholder in both companies, and comes as Beijing steps up scrutiny over tech giants from Didi Global Inc. to Meituan. The transaction, valued at about $6 billion at the time, was negotiated before the government crackdown that began in late 2020 and was aimed at creating the country’s dominant live-streamed gaming leader, akin to Amazon.com Inc.’s Twitch.

Guangzhou-based Huya offered to buy its competitor in October, proposing an all-stock transaction that would have created a combined business valued at about $11 billion at the time. Tencent would have had about 68% of the merged business’s voting shares.

But regulators announced a review of the acquisition in December as part of stepped-up scrutiny of previous M&A deals in the internet sector. Many companies, including Tencent and Alibaba Group Holding Ltd., have since been fined 500,000 yuan ($77,000) per deal, for failing to declare past acquisitions under the country’s anti-monopoly laws.

DouYu’s U.S.-traded shares slid 3.2% as the market opened in New York on Monday and Huya was down 2%.

(Updates with shares)

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