Chinese Regulator Approves Tencent’s $3.5b Deal To Buy Out Sogou Inc

On Tuesday, China’s antitrust regulator approved Tencent‘s plan to privatize Sogou Inc in a $3.5 billion deal. The deal was first announced in September and was pending approval in April. The deal entails Tencent buying 60% of Sogou and makes Tencent the latest Chinese company to exit U.S. markets amid tensions between China and the U.S.

Sogou Inc. is a leader in China’s Internet industry, with the mission of making it easy to communicate and get information. Sogou has grown to become the fourth largest Internet company in China based on monthly active users (MAUs) and is a strong rival of Baidu Inc., China’s largest search-engine service provider.

Tencent proposed buying out other investors last July. The approval shows that Tencent, for the first time in a while, might be on SAMR’s good side. Technology giants in the country have been faced with heightened antitrust scrutiny and Tencent wasn’t left out.

On Saturday, Tencent was blocked by the State Administration of Market Regulation (SAMR), from merging Huya and DouYu, the country’s biggest video game streaming services. The Chinese regulator said this action was based on antitrust issues.

China’s antitrust regulator is set to take over control of Tencent Holdings music streaming arm, as the imminent order will force Tencent Holdings Ltd to give up exclusive rights to its music labels.

Also, as a penalty for not properly flagging the acquisition of apps Kuwo and Kuguo, the company received a fine of 500,000 yuan ($77,150).

The approval is likely a relief for Tencent. Tencent’s shares jumped, rising 3.8% by early afternoon Tuesday in Hong Kong to 555 Hong Kong dollars, the equivalent of $71.46, per share. The city’s Hang Seng Tech index gained 2.1%.

The SAMR’s latest actions indicate that Chinese regulators are on the lookout to approve merger and acquisition deals in the tech sector, but now with stringent measures after years of a loosely-regulated approach.

The SAMR continues its antimonopoly crackdown on home-grown internet giants but maybe not be entirely interested in actively blocking deals after all.

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