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Tencent Holdings Is Acquiring Sogou and Taking It Private

By Eric Volkman – Sep 29, 2020 at 10:55PM

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The Chinese tech conglomerate follows through on an offer it made in July.

China's Tencent Holdings (TCEHY 3.70%) announced Tuesday that it has signed a definitive agreement to acquire the entirety of compatriot search engine operator Sogou (SOGO). Tencent, which already has a substantial stake in Sogou, will then take the company private. Sogou will become a subsidiary of its new owner and no longer trade on the stock exchange.

The deal does not come as a surprise. Tencent originally announced its offer in July.

All told, Tencent is paying $1.18 billion in the deal, which breaks down to $9 per share. Its main counterparty is another Chinese company, internet conglomerate Sohu.com (SOHU 3.71%) -- which, in a fairly tangled web of shareholdings, is currently the umbrella company that owns Sogou. The deal is expected to close in the fourth quarter of this year.

Chinese flag overlaid with binary code.

Image source: Getty Images.

The acquisition and eventual delisting come at a time of heightened tensions between the U.S. and China, particularly over the latter's companies and technology operating in this country.

The latest iteration of this is the controversy swirling around TikTok, the popular video-sharing app that the U.S. government has all but accused of being a data-stealing Trojan horse for China's communist regime. TikTok, owned by China's ByteDance, is in the process of a rather messy divestment to Oracle and Walmart undertaken to satisfy the demands of U.S. authorities.

On Tuesday, the American depositary shares of Sogou rose by 2.3% to close at $8.87, just shy of the acquisition price. Tencent's stock essentially traded sideways on the day. Sohu.com was the big winner of the three, rising to close up by over 11%.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tencent Holdings. The Motley Fool recommends Sohu.com. The Motley Fool has a disclosure policy.

Stocks Mentioned

Sohu.com Stock Quote
Sohu.com
SOHU
$15.08 (3.71%) $0.54
Tencent Stock Quote
Tencent
TCEHY
$40.64 (3.70%) $1.45
Sogou Inc. Stock Quote
Sogou Inc.
SOGO

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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