Tencent to buy China’s no-2 search engine

Sogou says it has received a takeover offer from Tencent, which will make it a wholly-owned subsidiary; then the search company will delist from trading in the US

Tencent to buy China’s no-2 search engine
A woman walks past an entertainment robot by Chinese tech firm Sogou during the China Digital Entertainment Expo and Conference, known as ChinaJoy, in Shanghai in August 2019. Photo: AFP.

(ATF) Sogou said this week it received a preliminary non-binding offer from Tencent to acquire the company, which would make it a wholly-owned subsidiary of Tencent once the takeover is completed. After that, the search company will delist from trading in New York.

Tencent intends to acquire, in cash, all remaining common stocks in Sogou, including ADS, that are not yet held by Tencent or its affiliates, at a price of $9.00 per ordinary share or per American depositary share (ADS).

The deal is worth around $2 billion.

Sohu, the parent company of the search engine, said it is considering the offer, which represents a healthy premium on its share price.

Chinese tech companies have been looking into listings closer to home as tensions rise between the United States and China on multiple fronts, and with US-listed Chinese firms coming under heightened scrutiny overseas.

Sogou CEO Wang Xiaochuan expressed gratitude to Tencent for its recognition of Sogou's value, technical capabilities and product innovation capabilities in the circle of friends. Next, relevant matters will be carefully discussed and measured, he said, so that Sogou can continue to create greater value for users.

Shares in Sogou and Sohu both rose sharply after the news late on Monday, affected by the news that Tencent plans to acquire Sogou. As of the close of US stocks, Sogou's share price rose 48% to $8.51, while Sohu's share price rose 39.96% to $15.55.

As of March 31, 2020, Tencent held nearly 40% of Sogou's equity, while Sohu holds 33.8%, Zhang Chaoyang holds 6.4%, and Sogou CEO Wang Xiaochuan holds 5.5%.

Sogou, which made its stock market debut in 2017 and has a market capitalisation of around $3.3 billion, is one of China’s leading portals.

Sina.com won the race to be top dog in the 90s and early 2000s. But now, Sogou's main competitor in China for search engines is Baidu, which has a Google-style presence over the global web and China's intra-web.

Tencent has become one of the world's largest gaming companies. And like other tech giants, has benefitted enormously from the billions of people forced into lockdowns around the world or restricted by social distancing.

With reporting by AFP.