On August 2, 2019, a man visits the Sogou booth on the day of the 2019 China Digital Entertainment Expo & Conference (Chinajoy) at the Shanghai New International Expo Center in Shanghai, China.
VCG | Visual china group | Getty Images
Shares of New York-listed Chinese search engine Sogo rose 48% on Monday after Tencent proposed to take the firm private.
One of China’s largest technology companies, Tencent, already owns about 39.2% of the total issued and outstanding shares and 52.3% of Sogou’s total voting power. Tencent has proposed $ 9 cash per American Depository Share (ADS) that it does not already own. This is a premium of about 56.5% of Sogou’s ADS closing price of $ 5.75 on July 24.
Shares of Sogou closed at $ 8.51 on Monday following the Tencent offer, bringing the firm’s value to $ 3.31 billion.
Sohu, the parent company of Sogu, said its board of directors had no opportunity to review and evaluate the proposal in detail yet, or to make any determination as to how to respond to the proposal. The acquisition of Sogu would be in Soho’s best interest, in its capacity as the controlling shareholder of Sogu, to approve or reject the offer. “
Tencent’s offer, if successful, would make it to Sogou Private and a D-list from the New York Stock Exchange (NYSE) at a time when US-China tensions are rising and threatening Chinese firms listed on Wall Street.
In May, the US Senate passed a bill that could make it difficult for Chinese companies to go public in the US and bear the risk of de-listing for those already there.
Already, several US listed Chinese companies such as JD.com and Alibaba have made secondary listings in Hong Kong.
Chinese chipmaker SMIC de-listed from the NYSE last year and executed a share sale in Shanghai in July. Social media and news company Nasdaq-listed Cena also received a personalization offer earlier this month from a company run by its chairman Charles Chao.
Other Chinese companies have also decided to make an initial public offering at home. Alibaba’s financial technology affiliate Ant Group announced plans for dual listings in Shanghai and Hong Kong earlier this month.
Tencent already has a relationship with Sogou. The search engine is integrated within Tencent’s increasingly popular WeChat messaging app. Analysts believe that the two companies are able to work together in more areas.
“We believe there will be greater synergy between Sogo and Tencent in future discovery and smart devices,” Jefferies equity analyst Thomas Chong wrote in a note on Wednesday.
– Correction: This article has been updated to reflect that Alibaba’s financial technology partner is now known as Ant Group.