Tencent Holdings has proposed to fully procure and take private the search engine group Sogou Inc. in a $2.1 billion deal, its mother company Sohu disclosed Monday, as Sogou seeks to join the ranks of China's tech giants aiming to abandon the American bourse.
In considering the bid, Sogou joins Chinese media company Sina in evaluating options to delist from U.S. stock exchanges in the wake of the latest investor-protection laws and China-U.S. trade doubts.
Tencent is interested in buying the entire outstanding ordinary shares of Sogou at $9 per share, a Sohu statement disclosed. The Shenzhen-based global multinational conglomerate's preliminary offering is not binding and has yet to be reviewed by the board of directors of Sohu.
Sogou's shares rallied 48 percent following news of the acquisition bid and closed at $8.51 on Monday, however, this is far below its all-time peak of $13.85 during the company's initial public offering.
Established in 2005, Sogou went public in 2017 and labeled itself as a challenger to Baidu, the largest search service in China, although it has long been relegated to the second spot. The group also runs the leading Chinese input operating system, which is patronized by 482 million customers every day to type and convert audio to text, its first quarter earnings report said.
Tencent has in previous years felt the extreme pressure brought about by its rivals ByteDance and other budding competitors in the emergent short-video landscape. The Beijing-headquartered Sogou – whose name means "search dog" – has long found itself in the default in a host of Tencent products that include its popular social app WeChat, which boasts of 1.2 billion active users. Tencent has also been working to explore possibilities in the artificial intelligence business.
Neither Sogou nor Sohu have come up with a final decision regarding Tencent's proposal, the companies stated. But if the tentative deal pushes through, Sogou will delist from the New York Stock Exchange to become a privately controlled entity of Tencent, Sohu said.
The escalating animosity between Beijing and Washington is being fanned throughout the financial markets. On May 20, CNBC reported that the U.S. Senate passed a law that restricts foreign firms from listing on American exchanges or securing funding from U.S. investors unless they can prove that they're not owned or controlled by a foreign government.
Tencent's proposed takeover of Sogou also elevates the possibility of a lucrative venture in Hong Kong or Shanghai in the coming years, following the well-received launches by JD.com and Alibaba Group.
