Baidu

EXCLUSIVE China Likely Won’t Approve Baidu’s $ 3.6 Billion Purchase of JOYY’s YY Live -sources

A Baidu logo is seen during the World Internet Conference (WIC) in Wuzhen, Zhejiang province, China on November 23, 2020. REUTERS / Aly Song

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HONG KONG, Sept. 24 (Reuters) – China’s competition regulator is unlikely to approve Baidu‘s $ 3.6 billion acquisition of national live video streaming company YY Live of JOYY Inc (YY.O), two sources with direct knowledge of the case told Reuters.

This follows Beijing’s decision to curb gaming-related businesses and business expansion through deals, they said.

Baidu-JOYY deal said to be latest multibillion-dollar deal to fail amid China’s sweeping crackdown on private companies, especially those in the internet industry, as Beijing seeks to control big data and break practices monopolistic.

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A failed deal with Baidu could cast a shadow over a separate deal slated to privatize Nasdaq-listed JOYY, which would have valued it up to $ 8 billion, the sources and two other sources familiar with the matter said.

Chinese search engine giant Baidu announced in November that it would buy YY Live from social media company JOYY, paying cash to help diversify revenue streams.

Contacted by Reuters, Baidu said it had not received any messages from Chinese regulators that the deal was unlikely to be approved.

The State Administration for Market Regulation (SAMR) – China’s antitrust regulator – and JOYY did not respond to requests for comment.

The agreement was awaiting SAMR approval to be finalized. JOYY was to receive the remaining approximately $ 1.6 billion of proceeds from Baidu after regulatory approval. Read more

SAMR said in a report in early September that it was conducting anti-monopoly reviews of 11 transactions, including Baidu’s acquisition of YY Live.

But one of the sources, who is familiar with the regulator’s thinking, said SAMR was unlikely to give the green light because allowing Baidu to acquire and invest more in a games-related live streaming business. video amid the recent crackdown on the gaming industry could send the wrong message to the market.

Another source, who was also familiar with the situation, said SAMR had already indicated to at least one of the parties to the agreement its position and added that the approval process will likely continue to drag on until the request expires.

“SAMR is hopeful that companies can withdraw the request,” the source said.

VIDEO GAME REVIEW

Beijing has expressed concern over the influence of video games on the country’s minors and last month introduced new rules that limit the time under-18s can spend playing video games.

He also criticized the entertainment industry for ‘polluting’ society and youth and recently released new guidelines on how artists and streamers should behave. Read more

Two months ago, SAMR formally blocked Tencent Holdings’ (0700.HK) $ 5.3 billion plan to merge the country’s two major video game streaming sites, Hula (HUYA.N) and DouYu. for antitrust reasons. Read more

Failure of the Baidu-JOYY deal would be a blow to the two main shareholders of JOYY, Chairman David Li and Xiaomi founder (1810.HK) Lei Jun, as the dynamics of their plan to privatize JOYY would change completely, according to the sources. .

They have teamed up to close the deal because they believe the Chinese social media company is undervalued in the US market, Reuters reported last month. Read more

Li did not respond to a request for comment made through JOYY. Lei also did not respond to a request for comment.

Founded in 2005, JOYY went public in 2012. It also operates the Singapore-based live streaming platform Bigo Live and owns a 16% stake in Huya.

YY Live relies heavily on games and entertainment content for its revenue and user traffic. Its average monthly active mobile users reached 42 million in the fourth quarter of 2020, up 1.9% year-over-year, according to the parent company’s 2020 annual report.

However, its paid users fell 1.1% over the same period, which JOYY attributed to the impact of COVID-19 on people’s spending.

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Reporting by Julie Zhu; Editing by Muralikumar Anantharaman

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