China's market regulator blocked Saturday the planned merger of game streaming companies platforms Huya and Douyu following an anti-monopoly investigation.
Huya and Douyu are two of China's biggest livestreaming operators. The proposed merger had been arranged by social media and gaming company Tencent and had been valued at around $5.3 billion.
Both Huya and Douyu count Tencent among their investors. In a statement, China's State Administration for Market Regulation said a consolidation between the two game streaming platforms would give Tencent control over the merged entity.
The administration said it blocked the proposed deal because it would strengthen Tencent's dominance in the video game-streaming market in China, giving the company an anti-competitive advantage, The Associated Press and Reuters said.
Douyu is listed on the Nasdaq. Huya is listed on the New York Stock Exchange. Tencent is listed in Hong Kong. Tencent is Huya's biggest holder with almost 37% stake and it also owns a third of Douyu.
The administration said Huya and Douyu's combined market share in the video game livestreaming industry would be more than 70%, according to Reuters.
"If Douyu and Huya are to merge, the original joint control of Douyu will become Tencent's complete control of a merged entity," Zhang Chenying, a member of the state council's antitrust committee, said in quotes by Reuters.
The case marks the first rejection by the administration on investment deals by China's biggest internet companies. According to Bloomberg, the ruling is a blow to Tencent, as China steps up its investigation on Chinese internet companies, from Didi Global to Meituan.
Douyu and Huya first announced in October that they planned to consolidate, but market regulators later said they would review the deal, valued at $6 billion at that time.
Tencent will abide by the regulators' decision and comply with all regulatory requirements and "fulfill our social responsibilities," the company said in a statement Saturday.
