Chinese Sohu, Sogou Shares Skyrocket More Than 40% In New York After Tencent Buyout Offer

Tencent Holdings Limited’s TCEHY offer to purchase Sogou Inc SOGO, and take it private, sent the Chinese search engine firm, and parent company Sohu.com Ltd's SOHU, shares soaring on Monday. 

What Happened 

The Shenzhen-based technology giant is proposing to pay $9 per American depositary share of Sogou in cash, a premium of 56.5% on July 24’s closing price of $5.75.

The Chinese multimedia conglomerate already owns 39.2% of Sogou’s total issued and outstanding shares and has 52.3% of total voting power in the firm. The search engine's parent Sohu hasn't yet decided on its response to the offer, it said in a statement disclosing the offer. 

The Sogou search engine is already integrated into Tencent’s popular messaging platform WeChat.

Why It Matters

The Tencent offer comes at a time for Sogou when Chinese companies listed in the United States are scrambling for alternatives, as relations between the two countries continue to deteriorate. The  U.S. Senate approved a bill in May that could lead to the delisting of a significant number of Chinese companies on the country's exchange desks. 

Last month JD.Com Inc JD carried out a secondary listing in Hong Kong that raised about $3.88 billion.  Alibaba Group Holding Limited BABA also debuted in Hong Kong last year and raised $11 billion in its IPO.

Ant Financial Services Group, an Alibaba subsidiary, is planning simultaneous listings in Hong Kong and Shanghai.  

Price Action 

Sogou shares closed 48% higher at $8.51 on Monday after the offer was made, taking the company’s valuation to $3.31 billion. The shares were mostly unchanged in the after-hours session.

Sohu shares added nearly 40% at $15.55 in the regular session, and were up another 2.4% at $15.92 in the after-hours session.

Photo  by WhisperToMe on Wikimedia Commons