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Tencent takes Sogou private in acquisition deal

Written by Mengyuan Ge Published on     2 mins read

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Sogou is China’s second largest search engine with 14.3% of the market share.

Sogou announced on Friday that it has completed its merger with Tencent at a price of USD 3.5 billion. After the transaction, Sogou became an indirect subsidiary of Tencent, according to the company’s statement.

Sogou’s business and products will be absorbed into corresponding departments that are part of Tencent’s Platform and Content Group. These include its search engine, AI services, input method, browser, reader, and other products. However, search engine and input method products, which are the most popular among users, will continue to operate under the Sogou brand, according to Tencent Technology, a media subsidiary of Tencent.

Tencent first sought to buy Sogou privately in July 2020, when it signed an agreement with Sogou to acquire all of its outstanding shares not owned by Tencent at a price of USD 9 apiece, or USD 3.5 billion in total. The transaction was originally due to be completed in the fourth quarter of 2020 but was delayed because of regulatory screening.

Tencent has been Sogou’s second largest shareholder since 2013, when it paid USD 448 million for a 36.5% stake in the company and merged its own search engine, Soso, with Sogou. Afterwards, Sohu—a media, video, and gaming business group—remained the controlling shareholder of Sogou, while Sohu and Tencent held 38.1% and 36.5% of shares respectively, maintaining joint control of Sogou.

At the beginning of July this year, the State Administration for Market Regulation fined Tencent RMB 500,000 (USD 77,000) for failing to report its acquisition of Sogou in 2013, but made it clear that the acquisition did not violate antitrust laws. A few days later, regulators approved the deal.

As a result of the deal, Sohu received USD 1.18 billion in cash from Sogou’s sale to Tencent, and no longer has any ownership interest in the company.

With the acquisition of Sogou, Tencent will be able to restart its search engine business. The closed-looped WeChat content ecosystem and the search engine will feed traffic to each other.

According to the latest numbers released by Statcounter, in August 2021, Baidu still ranks first among China’s search engine products, occupying 76.7% of the market. Sogou ranks second with 14.3% market share, while Bing and Google control only 3.6% and 2.4% of the market, respectively.

Read this: Chinese regulators order mobile apps to rectify ‘mishandling’ of user data

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