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DouYu Soars on Merger Agreement With Huya

DouYu will be acquired by fellow Chinese streaming company Huya in an all-share deal.

DouYu International Holdings  (DOYU) - Get DouYu International Holdings Ltd. Sponsored ADR Report was soaring Monday following its agreement to be acquired by fellow Chinese streaming company Huya  (HUYA) - Get HUYA, Inc. Sponsored ADR Class A Report in an all-share deal.

American depositary receipts of DouYu were climbing 12.5% to $15.76, while Huya ADRs were down 9.7% to $23.28.

Investors have been offered 0.73 American depositary shares of Huya for each ADS of DouYu, the companies said. Shareholders will each hold about 50% shares of the combined company on a fully diluted basis.

Bloomberg estimated the deal has a market value of more than $11 billion.

Tencent Holdings  (TCEHY) , which currently owns stakes in both companies, will hold about 68% of the merged business’s voting shares. Tencent was up 1.4% to $71.90.

Tencent, Huya's biggest shareholder, also owns over a third of DouYu and had been pushing for the deal for months, Reuters reported.

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The boards of both companies unanimously approved the deal, which is expected to close in the first half of 2021 if investors holding two-thirds of DouYu’s shares vote in its favor.

The merged entity would have a combined market share of more than 80% in the country, Reuters said, citing data from MobTech.

Tencent will assign its interests in the game live streaming business under its "Penguin e-Sports" brand to the  newly merger company for $500 million. This transaction is expected to close concurrently with the merger.

If completed, the merger will result in DouYu becoming a privately-held and wholly owned subsidiary of Huya and DouYu ADSs will no longer be listed on the Nasdaq. 

Huya CEO Rongjie Dong and his DouYu counter-part Shaojie Chen, will be co-CEOs of the combined company.

China’s game-streaming market is estimated to generate 23.6 billion yuan ($3.5 billion) in revenue this year, Bloomberg said, citing iResearch.