Tencent acquires Sogou! Aiming at Baidu, ByteDance and Alibaba, a new search war is about to begin

Author | Li Shuaifei

Tencent, which has always had a mild investment style, actually decided to acquire a company in full!

Not only that, this company is not ordinary at all - it is also one of the most well-known Internet companies in China, Sogou.

Yes, Tencent has decided to take over Sogou completely.

On the evening of July 27, Sogou announced that its board of directors had received a preliminary non-binding proposal from Tencent - the purpose of this proposal was to acquire the company.

Specifically, in this proposal, Tencent intends to acquire all remaining outstanding common shares of Sogou, including ADSs, that are not already held by Tencent or its affiliates, at a price of US$9.00 per common share or American Depositary Share (ADS) in cash.

If the proposed transaction is completed, Sogou will become a non-publicly held, indirect wholly-owned subsidiary of Tencent, and Sogou ADS will be delisted from the New York Stock Exchange.

However, Sogou also said that the board of directors had just received the proposal and had not made any decision yet; a special committee of the Sogou board of directors composed entirely of independent directors would review the proposal. Sogou also said that there was no guarantee that Tencent would make a final offer.

Leifeng.com learned that Tencent is currently the largest shareholder of Sogou. Therefore, Tencent’s purpose this time is very simple:

Completely acquire all shares of Sogou and make Sogou a wholly-owned subsidiary of Tencent.

It is worth mentioning that in response to Tencent’s proposal, Sogou CEO Wang Xiaochuan reposted the comment in his WeChat Moments:

I would like to thank Tencent for recognizing Sogou's value, technical capabilities, and product innovation capabilities. We will seriously discuss and weigh the relevant issues so that Sogou can continue to create greater value for users.

Leifeng.com found that according to the latest annual report released by Sogou, the company's largest shareholder is Tencent, which holds 39.2% of the shares and has 52.3% of the voting rights.

At the same time, Sohu is the second largest shareholder of Sogou, holding 33.8% of the shares and 44.1% of the voting rights, while Zhang Chaoyang himself holds 6.4% of the shares and 0.9% of the voting rights.

In addition, on Sogou's current board of directors, Zhang Chaoyang serves as chairman and Wang Xiaochuan serves as executive director and CEO; at the same time, Tencent Vice President Yin Yu also serves as a director on Sogou's board of directors.

Tencent’s move is not surprising - in fact, Tencent has always been obsessed with its search business.

After all, Tencent once had its own search business.

Tencent's search business "Soso" was actually one of the many search engines at the time. In terms of product concept, Soso once stated that it would strive to build an innovative search platform that is precise, personalized, and community-based. Not only that, "there will not be a single advertisement in Soso's search results."

Interestingly, Soso was once technically supported by Google.

Later, Soso was independently developed by Tencent, and even a search division was established in 2010. In Tencent's structural adjustment in 2012, Soso was streamlined and divided into the search technology department, search product department and community search department.

However, Soso's fate came to an abrupt end with Tencent's transformation.

On September 16, 2013, Tencent announced a strategic investment of US$448 million in Sogou, and merged its search and QQ input method into Sogou's business. Tencent will hold a 36.5% stake in the new Sogou - Soso will eventually be integrated into Sogou.

In the following years, Tencent apparently remained silent in the search field, but in fact it continued to increase its search business by relying on the size advantage of WeChat. At the same time, relying on Tencent behind them, WeChat and Sogou also cooperated in various aspects of the search business.

Of course, during this period, Sogou has also continued to grow, especially in the areas of smart hardware and AI technology, and was successfully listed on the New York Stock Exchange in November 2017.

However, just when the search field seemed calm and peaceful, a war was brewing.

After all, the search field is of great importance, and no one is willing to let Baidu dominate this market alone.

One of the "later wave" players who are eyeing the market is naturally the powerful ByteDance. In 2019, ByteDance openly announced that it would build a new search engine and gradually swallowed up Hudong Baike. The web version and App of Toutiao Search have already been launched.

Toutiao Search App

At the same time, Alibaba is also continuing to increase its investment in search. In addition to its continuously increasing investment in Quark Search, the search business has become the core traffic entrance for users to obtain mini-program services on the Alipay side in 2019 - even in May 2020, Alipay established a search division for the first time.

At this time, Tencent, which has always been wary of ByteDance and Alibaba, naturally cannot do nothing in the search field.

However, it chose the simplest, most direct and most effective way: acquiring Sogou.

Judging from the current situation, Tencent, which holds more than half of the voting rights on Sogou's board of directors, has basically secured the victory over Sogou.

In addition, Leifeng.com learned from insiders that Sogou CEO Wang Xiaochuan has been in Shenzhen frequently in recent times, apparently to discuss acquisition and integration with Tencent.

At the same time, many senior industry insiders expressed optimism about Tencent's acquisition of Sogou. After all, the search field is the best monetization model for page traffic, and Tencent has no reason to give up.

Leifeng.com noticed that the capital market also gave positive feedback on Sogou's acquisition by Tencent - Sogou's stock price soared 46% before the market opened and basically maintained this increase after the opening.

As of the time of writing this article on Leifeng.com, Sogou's stock price had risen by 47.22%, and its market value remained at US$3.29 billion.

References for this article:

• http://ir.sogou.com/2020-07-27-Sogou-Announces-Receipt-of-a-Preliminary-Non-Binding-Proposal-to-Acquire-the-Company