What is Tencents 10 billion privatization of Sogou? Industry: or back to the science and Technology Innovation Board

 What is Tencents 10 billion privatization of Sogou? Industry: or back to the science and Technology Innovation Board

Tencent, which is not short of money, has made a move again.

If the deal is completed, Sogou will become a privately held indirect wholly-owned subsidiary of Tencent, and Sogous American Depository shares will be delisted from the New York Stock Exchange.

In response to the acquisition offer, Sogou expressed its gratitude to Tencent for its recognition of Sogous value, technological capability and product innovation capability. Next, we will seriously discuss and measure the relevant issues, so that Sogou can continue to create greater value for users.

As of press release, Sogous share price rose by 47.91% to 8.51 US dollars per share. At present, its market value has soared to US $3353 billion. According to the above-mentioned 9 US dollars per share, Tencents acquisition price will exceed 10 billion yuan.

Analysts believe that for Tencent and Sogou, this is a win-win deal. On the one hand, after the wholly-owned acquisition, they are expected to achieve better business coordination in AI and other aspects; on the other hand, Sogou can also be listed on the science and technology innovation board after privatization, so as to obtain higher valuation and capital operation space.

According to time finance, Tencent had been the single largest shareholder of Sogou, with 39.2% of shares, and Sohu, the second largest shareholder, held 33.8%. Sohu CEO Zhang Chaoyang and Sogou CEO Wang Xiaochuan hold 6.4% and 5.5% shares respectively.

In August 2010, in order to counter 360s acquisition plan, Sohu and Alibaba announced the separation of Sogou and the establishment of an independent company to introduce strategic investment. At that time, Alibaba invested $15 million to acquire a 10% stake in Sogou. Until July 2, 2012, Sohu bought back Alibabas shares.

In September 2013, Tencent injected $448 million into Sogou, and merged its Tencent search business and other related assets into Sogou. Sogou continues to operate independently as a subsidiary of Sohu. Zhang Chaoyang, CEO of Sohu, is still the chairman. Wang Xiaochuan, founder of Sogou, is the director and CEO of Sogou.

In June 2014, Sogou formally searched the official account of WeChat public data. Users can browse the WeChat official account and all articles related to the query on Sogou search results page.

Internet analyst Ding Daoshi told time finance that the acquisition can be described as boot landing. Sogou and Tencent have carried out long-term business binding. The value of Sogou in Sohus value system is limited. If Tencent is allowed to operate, Sogou can also play a greater advantage.

On May 18 this year, after Changyou was privatized and delisted, Zhang Chaoyang said that Changyou, as an important profit center of Sohu, was considering listing on the science and technology innovation board or the Asian market; Netease also chose to be listed in Hong Kong on the 20th anniversary of its establishment. Such as Baidu, Ctrip, and so on have come out in Hong Kong secondary listing information.

In this regard, Shen Meng, executive director of Xiangsong capital, pointed out to time finance that the privatization of capital stocks in the U.S. market is basically to return to the science and technology innovation board or the registered gem. Since Hong Kong does not need privatization, Changyou and Sogou are more likely to be listed on the science and technology innovation board in the future.

Is there any other obstacle to Tencents acquisition of Sogou?

Sogou reminded the companys shareholders and other people considering buying and selling the companys securities in the announcement that the board of directors of the company has just received the proposal and has not made any decision on the proposal and the proposed transaction. There is no guarantee that Tencent will make any final offer to Sogou, that there will be any final agreement related to the proposal between Sogou and Tencent, nor can it guarantee the proposed transaction Or any other similar transaction will be approved or completed.

Shen Meng said that similar expressions are generally standard terms for information disclosure in the U.S. market. As long as both sides reach an agreement, there will be no obstacles in the approval process.

A win-win deal

At present, Sogous three major business sectors are search, input method and AI. According to the financial report data, input method business is the main source of Sogous income.

The increasing cost of online traffic acquisition has become a big pain point for search companies. In the revenue and cost of Sogou in 2019, the traffic cost reached 562.2 million US dollars, a year-on-year increase of 6%, exceeding the annual revenue growth and search business income growth level.

Under internal and external pressure, Sogou needs to find a better breakthrough. On March 6 this year, Sogou announced that it would take a stake in Chunyu doctor, a mobile medical platform, with 6.39% of the companys shares, temporarily listed as the seventh largest shareholder of the company. Sogou said to the times finance and economics that the investment can continue to help Sogou improve its own medical business framework, and it is also an active attempt to empower the medical vertical scene through AI.

However, as Dr. Chunyu is still struggling with the profit and loss line, and lags behind Pingan good doctor, good doctor online and Tencent micro medicine, how much boost it can bring to the business of both sides is still unknown. After Tencents acquisition of Sogou, the two sides can form a greater joint force in the medical business.

In addition, AI is also the key business of Sogou. In August last year, Sogou told time finance that Sogou has been eliminating products that are not closely integrated with AI and upgrading to strong AI hardware.

In the first quarter of 2020, according to Sogou, the sales of AI recorders have occupied 35% of the whole market. Sogou CEO Wang Xiaochuan said that with the release of recording pen and the listing of new hardware, the proportion of intelligent hardware in the overall revenue will be significantly increased, which is expected to be within 10% of the overall revenue.

In terms of AI business collaboration, Sogou is better at intelligent voice and peripheral hardware, which is just the short board of Tencents AI business. Previously, a smart voice buyer once told time finance that Tencents smart voice business is mainly focused on Tencent Entertainment Content, and has not been deeply cultivated in voice interaction, with few products and poor experience. After the merger, the two sides can complement each other in AI business.

At the same time, the above-mentioned people also pointed out that the enterprises that can provide similar AI capabilities are cheetah mobile. Tencent is now cheetahs second largest shareholder, with a 16.4% stake and 22.1% voting rights. The voting rights of Kingsoft and Tencent are 48.4%, which is slightly higher than that of Fu Sheng (46.8%). However, cheetah has separated most of its AI business to Beijing Orion Star Technology Co., Ltd. Therefore, in the field of voice interaction, Sogou can be said to be the best target.

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