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Tencent Beefs Up Game Streaming Arm After China Kills Merger

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(Bloomberg) -- Tencent Holdings Ltd. has begun re-deploying people and resources toward its own game streaming platform, after China blocked a merger that would have cemented the social media giant’s lead in a $3 billion sector.

Tencent proposed combining investees Huya Inc. and DouYu International Holdings Ltd. -- China’s two biggest Twitch-like services -- in 2020, but the country’s antitrust watchdog rejected the deal in July after Beijing stepped up scrutiny of big tech. Now, Tencent has set up a new team dedicated to product design and operations at its Penguin Esports streaming app, while disbanding a department that focused mainly on liaising with Huya and DouYu, according to a person familiar with the matter.

The newly established wing of Penguin Esports will be headed by Huya Chairman Huang Lingdong. Bobby Jin, who runs Tencent’s League of Legends Chinese esports league, will serve as Huang’s second-in-command, according to the person. The existing game-streaming department will be broken up, with some of its staff relocating to Penguin Esports, said the person, asking to not be identified citing private information.

A Tencent spokesperson said Penguin Esports has been operating smoothly but declined to comment on the restructuring, which was first reported by local media outlet Jiemian.

In rejecting the Huya-DouYu merger, China’s antitrust agency sent a strong message about heightened scrutiny over deals orchestrated by giant internet companies. It dealt a blow to Tencent and coincided with a campaign to rein in big tech that’s since expanded beyond antitrust and e-commerce to areas including media and data security.

The transaction, valued at about $6 billion at the time, was negotiated before the crackdown began in late 2020 and was aimed at creating the country’s dominant live-streamed gaming leader, akin to Amazon.com Inc.’s Twitch. Together with Tencent, the platforms would have unrivaled leadership in game-streaming, though they would still compete for users’ attention with hotter services like ByteDance Ltd.’s Douyin and Bilibili Inc.

As part of the original proposal, Tencent had planned to assign Penguin Esports to the combined entity for $500 million.

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