10 Updates

Tencent Ties Up With Korean Gamer, Eyes Youku Tudou

Mar 28 2014, 8:46pm CDT | by

Internet leader Tencent (HKEx: 700) has just announced a major purchase involving a Korean game maker, in what would normally be leading news on the Chinese Internet. But instead, the company is...

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17 weeks ago

Tencent Ties Up With Korean Gamer, Eyes Youku Tudou

Mar 28 2014, 8:46pm CDT | by

Internet leader Tencent (HKEx: 700) has just announced a major purchase involving a Korean game maker, in what would normally be leading news on the Chinese Internet. But instead, the company is making bigger headlines on talk that it’s nearing a deal to buy 20 percent of leading online video firm Youku Tudou (NYSE: YOKU) for a smaller amount. The 2 deals collectively would be worth about $1 billion, which these days doesn’t seem like big news anymore for China’s rapidly consolidating Internet.

These latest 2 deals reaffirm Tencent’s strategy of buying major strategic stakes in other companies without taking full control. The confirmed deal will see China’s largest Internet company pay $500 million for 28 percent of South Korea’s CJ Games, which will help Tencent maintain its edge in its core online game business. (company announcement) But the bigger headlines are going to another deal that would see Tencent buy the 20 percent Youku Tudou stake for around $300 million. (English article; Chinese article)

Let’s quickly review these 2 deals, starting with CJ Games. The Korean company will sell its stake through the issue of new shares, giving Tencent access to its portfolio of online and mobile games. The deal looks similar to another one that Tencent did last year, which saw it participate in a management-led buy-out of leading global game maker Activision Blizzard from its French owner Vivendi (Paris: VIV). (previous post)

These kinds of stake purchases look rather smart, as they give Tencent preferred access to the games developed by its strategic partners, who otherwise might prefer to sell to Tencent’s Chinese rivals. One of Activision Blizzard’s most popular franchises, the World of Warcraft series, is currently licensed in China by NetEase (Nasdaq: NTES), the country’s second biggest game operator. But I previously predicted that following its Tencent tie-up, Activision could decide to move the title to Tencent once NetEase’s current license expires.

Next let’s look at the Youku Tudou deal, which has Chinese media buzzing because it involves the nation’s leading online video company. Most of China’s biggest online video sites have been acquired by bigger companies over the last year after realizing they couldn’t survive on their own. But Youku Tudou has resisted that trend, remaining independent up until now.

Youku Tudou’s CEO Victor Koo said as recently as last week that he wouldn’t sell his firm but could consider a strategic partner, and now that looks like what could soon happen. Media are citing a wide range of sources, all of them anonymous, saying the two sides have struck a deal and a formal announcement could come soon. The deal would see Tencent get the 20 percent of Youku Tudou, and the 2 companies then combine their video assets.

This kind of deal looks quite similar to another one that Tencent announced earlier this month, when it said it would pay cash and inject its own e-commerce assets into JD.com in exchange for 15 percent of the country’s second biggest e-commerce company. (previous post) In that case and now with Youku Tudou, Tencent seemed to get its stakes at a relatively big discount, reflecting the value of the connections it can offer to both of these smaller companies.

From a broader perspective, these 3 recent deals and similar earlier ones all seem to show that Tencent prefers to keep its focus on its core gaming and social networking (SNS) businesses, and form equity tie-ups with strategic partners in other areas. This looks like a good strategy to me, as it allows the company to stay focused on what it does best while also reaping benefits from businesses like e-commerce and video. Of course not all such tie-ups always work, as evidenced by the failed partnership between Yahoo (Nasdaq: YHOO) and e-commerce leader Alibaba. But if they don’t work, then Tencent can easily sell out its stake the same way Yahoo is doing now.

Bottom line: Tencent’s 2 latest purchases reflect its M&A approach of taking big stakes in strategic partners, in a bid to find new business opportunities while focusing on its core strengths.

Doug Young is a former China company news chief for Reuters who teaches financial journalism at Fudan University in Shanghai. To read more of his commentaries on China tech news, click on www.youngchinabiz.com.

Source: Forbes Business

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was tol ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk S ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.7 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustap ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme 20 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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