Tencent Eyes $2.1B Deal For Sogou Search Engine

Chinese tech giant Tencent has added longtime search ally Sogou to its shopping list.

Sogou, which means “search dog” in Chinese, announced on Monday (July 27) that it has received a preliminary, non-binding proposal from Tencent to buy outstanding shares of the firm at $9 apiece.

In a statement detailing the offer, Sogou said a committee made up of independent directors will consider the proposal. If its board accepts the deal, Sogou would become a privately-held subsidiary of Tencent once the transaction is complete.

In a letter to Sogou’s board of directors, Tencent President Martin Lau noted that the social media and gaming giant’s offer of $9 per share is 56.5 percent higher than Sogou’s closing price on Friday of $5.74 a share.

It also amounts to an 84.9 percent premium over the average price of Sogou’s volume-weighted shares over the past 30 days.

“We believe that our proposal provides an attractive opportunity for the Company’s shareholders,” Lau wrote.

The proposed deal, valued at $2.1 billion, comes seven years after Tencent snapped up a 36.5 percent stake in Sogou to fend off a potential acquisition of the search firm by rival Baidu. In addition, Tencent already owns a majority of Sogou’s voting shares.

Sogou was launched in 2005 and went public three years ago, emerging as the main – though somewhat distant – rival of Chinese search giant Baidu. Sogou already enjoys a fairly close and synergistic relationship with Tencent, serving as the default search engine for Tencent’s WeChat platform.

Tencent’s relationship with Sogou has been fairly typical of its investment and acquisition strategy, with Tencent preferring to take stakes in companies rather than buying them outright.

Tencent has stakes in more than 700 companies across the world, the Financial Times reported last year, including a $150 million investment in Reddit. It also has seats on the boards of more than 400 of those companies.