What happened

Shares of DouYu (DOYU 1.21%) popped Monday, trading 9.3% higher as of 1:10 p.m. EDT, while shares of Huya (HUYA 0.45%) had dropped by 12.5% after Huya announced  it would acquire rival DouYu. Chinese tech giant Tencent (TCEHY 3.56%), which owns stakes in both live-streaming companies, has been pushing for a combination.

So what

Huya is offering 0.73 American Depository Shares (ADS) for each DouYu ADS in an all-stock deal. Based on Friday's closing prices, the transaction values DouYu shares at approximately $18.83, or about a 35% premium to where they finished last week.

The boards of both Huya and DouYu have approved the deal, but DouYu shareholders representing at least two-thirds of voting power will still need to approve the merger. DouYu co-CEOs Shaojie Chen and Wenming Zhang, who have 54.6% combined voting power, have committed to voting in favor of the deal.

Woman livestreaming on a computer

Image source: Getty Images.

In a separate deal worth $500 million, Tencent has agreed to assign its interests in its Penguine e-sports live-streaming business to DouYu while deepening its ties with the company.

Now what

Huya and DouYu shareholders will each wind up with roughly 50% of the combined company, which will be led be Huya CEO Rongjie Dong and DouYu's Chen as co-CEOs.

Tencent has entered into a separate agreement to buy DouYu shares from Chen -- the company expects to wield approximately 67.5% of the combined company's total voting power. The merger is expected to close in the first half of 2021.