DouYu has terminated a merger with rival Huya

DouYu announced its withdrawal after regulators rejected the deal over the weekend, saying it would strengthen Tencent’s dominance in Chinese game streaming and give it an anti-competitive edge. Huya and DouYu together control more than 80% of the market based on active users, the State Administration for Market Regulation said in a statement Saturday.

The case marks the antitrust agency’s first rejection of mergers and investment deals by China’s internet companies.

This decision is a blow to Tencent (shareholder in both companies) and comes as Beijing steps up scrutiny over tech giants from Didi Global Inc. to Meituan. The transaction was negotiated before the government crackdown that began in late 2020 and was aimed at creating the country’s dominant live-streamed gaming leader

Guangzhou-based Huya offered to buy its competitor in October, proposing an all-stock transaction that would have created a combined business valued at about $11 billion at the time. Tencent would have had about 68% of the merged business’s voting shares.

But regulators announced a review of the acquisition in December as part of stepped-up scrutiny of previous M&A deals in the internet sector.

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