Chinese tech giant Tencent Holdings is reportedly now in talks with its video game streaming platform competitors Huya and DouYu International Holdings for a potential merger. According to sources with knowledge of the matter, the company is aiming to form China's largest video game streaming platform through the consolidation.
Tencent already holds partial stakes in its competitors, namely a 37 percent stake in Huya and a 38 percent stake in Douyu. If it manages to consolidate the two companies with its platform, Tencent could potentially dominate the country's massive $3.4 billion video game streaming sector.
Sources stated that a deal has yet to be finalized and all parties involved are still negotiating the terms of a potential agreement. The same sources claim that Tencent is seeking to be the largest stakeholder in the merged company.
Other items that are reportedly being discussed is how each platform will operate once an agreement is reached. One source claims that both Huya and DouYu will still be able to keep their platforms operational but they will be required to allocate some of their resources to Tencent's eGame video game streaming service. Meanwhile, Tencent is also planning to sell ads across both Huya and DouYu's respective platforms.
Combining Tencent's streaming platform with DouYu and Huya's platforms will create a massive online giant that will have more than 300 million active users. The combined company is expected to have a market valuation of more than $10 billion.
Following the news of the merger talks, share prices of all three companies rallied during pre-market trading on Wednesday. Tencent's shares in Hong Kong climbed by around 2 percent to a two-week high. Huya's shares in New York climbed by 15 percent, while Douyu's shares in the city's exchange climbed by 18 percent.
Huya and DouYu have recently established themselves as the leading video game streaming platforms in China. Both platforms extensively feature video game titles developed by Tencent, including popular titles such as Honour of Kings and PUBG Mobile. In recent months, both companies had lost some market share as users shifted to ByteDance's new video game streaming platform Douyin.
According to research firm iResearch, China's video game streaming market is continually growing. For the first half of this year, the industry generated revenues of more than 23.6 billion yuan or roughly $3.4 billion.
