Yesterday evening, Tencent revealed it’ll take a 36.5% slice of search engine rival Sogou for US$448-million.
The deal should boost both Sogou and Tencent’s own search engine, Soso. Tencent shares were already at their highest ever level on Monday, as if some investors had an inkling of what was going on. On Monday, before the Sogou deal was announced, Tencent hit a market cap of HK$783.53 billion, which is US$101.05 billion — the first time Tencent’s value had ventured into 12 digits. Facebook is currently at US$103.53-billion.
The Hong Kong Stock Exchange just opened for Tuesday trading, allowing investors to react for the first time to the news. Tencent shares were down nearly one percent by 10am local time on Tuesday, with profit-seeking investors likely to take Tencent back below the historic US$100-billion marker during the day.
Rival Qihoo drops
But investors saw the Tencent-Sogou merger as bad news for China’s disruptive second largest search engine, Qihoo’s So.com (yes, they all have similar names as “sou” means “search” in Chinese). Qihoo shares fell 5.61% overnight in New York trading.
Basically, Qihoo has lost the last chance to boost its search engine with the acquisition of a fairly sizable rival (Sogou has nine percent market share of search page-views); only very minor search engines remain as independent.
Meanwhile, investors in China’s top search engine Baidu seemed relieved that aggressive Qihoo had missed this chance, with Baidu shares opening very strongly before returning to the same value, US$142 per share, as last Friday.
This article by Steven Millward originally appeared on Tech in Asia, a Burn Media publishing partner.