On January 2nd, Science and Technology Innovation Board Daily reported (Reporter Zhang Yangyang) that after three years of tug of war, Baidu has officially abandoned its acquisition of Huanju Group (hereinafter referred to as YY).
On the evening of January 1st, Baidu announced that its related party Moon had terminated its equity acquisition agreement with YY Live. The $3.6 billion acquisition that shocked the market three years ago has now been invalidated.
Later that evening, YY also announced the termination of the transaction. The announcement stated that although the sales process of YY Live to Baidu was basically completed on February 8, 2021, there are still some follow-up matters to be dealt with. However, Baidu stated in the notice that it had exercised its right to terminate this transaction. In response to this, Huanju Group is actively seeking legal advice and considering taking all possible countermeasures against Baidu's decision.
On November 16, 2020, Baidu signed an equity acquisition agreement with Huanju Group, in which the former decided to acquire YY's domestic video entertainment live streaming business for a consideration of 3.6 billion US dollars. At that time, the acquisition was considered the largest acquisition in Baidu's history.
It is worth mentioning that YY's latest US stock market value is $2.414 billion. Simply put, from the book, Baidu's "regret marriage" can reduce losses by about 1.2 billion US dollars.
According to the agreement at the time, if both parties fail to complete the transaction delivery before the deadline, either party to the transaction has the right to terminate the agreement. As of December 31, 2023, which is the final deadline of the agreement, all the delivery prerequisites stipulated in the share purchase agreement have not been met.
Insiders from Baidu and YY, as well as relevant investors, told a reporter from the Science and Technology Innovation Board Daily that next, Baidu and Huan will gather to negotiate the termination of the transaction and explore reasonable solutions.
Although this acquisition has not been officially implemented in the form of a document in name, as stated in YY Live's announcement, "the sales process was basically completed on February 8, 2021." In fact, in the past three years, YY has fully integrated into Baidu, becoming a reliance on the latter's live streaming business.
A YY employee told a reporter from the Science and Technology Innovation Board Daily that after the acquisition, YY Live employees transferred to Baidu. The YY Live team also moved to Penghuan Building near Xierqi in Haidian District, Beijing as early as 2021. This building is one of Baidu's four main office locations in Beijing. In addition, in February 2021, Baidu also dispatched Cao Xiaodong, then Vice President of Baidu, General Manager of Mobile Ecological User Growth Department, and General Manager of Interactive Entertainment Platform, to officially take over YY.
As for the current impact of this incident on the business, a YY employee told a reporter from the Science and Technology Innovation Board Daily that they are currently working normally.
As the largest merger and acquisition case in Baidu's history, both parties in the transaction were giants in their respective fields, and the live streaming business involved was also at the top of the Internet industry trend at that time. Amidst discussions and doubts, this acquisition gained a lot of attention at that time.
But in the past three years, the internet and online live streaming industry has gone through a round of ups and downs, and the market direction has already changed.
From Baidu's perspective, starting with search, this industry giant born in the era of mobile internet has shifted its business focus to autonomous driving and artificial intelligence, and these two industries are in their early stages. In the future, Baidu still needs to continue to invest. In the current era where the entire internet industry emphasizes cost reduction and efficiency improvement, every investment of Baidu needs to be spent on the cutting edge.
YY Live is a veteran player in the industry, specializing in live streaming on fashion shows. But in these three years, the live streaming industry has undergone tremendous changes.
With the rise of short videos, short video platforms such as Tiktok and Kwai have become the latecomers. The live broadcast of games and live broadcast of goods have been separated. The traditional live broadcast of show shows that are good at YY has gradually declined, including traditional live broadcast platforms such as Tiger Teeth, Chinese prickly ash, Yingke, and so on.
In terms of stock prices and financial indicators, YY Live's Happy Era reached its peak between 2018 and 2020, which was also the golden period of traditional live streaming platforms. Since then, the situation has sharply declined.
The latest financial data shows that Huanju Group's revenue in the third quarter of 2023 was 567.1 million US dollars, a year-on-year decrease of 3.3%; The net profit was 72.89 million US dollars, a year-on-year decrease of 85.85%. Among them, the revenue of live streaming business has also been in a year-on-year decline, with the first three quarters of 2023 being $520.4 million, $477 million, and $496 million, respectively.
Excluding the impact of the news of Baidu's acquisition three years ago (ignoring the new high in stock price brought by Baidu's acquisition in 2021), the latest stock price of Juju Era has fallen by more than 68% compared to the peak period in 2018.
Financial data/data source for the past 5 years of Juju Era: Wind
The termination of the high price acquisition has relieved many market participants for Baidu. As for YY Live, some analysts believe that this announcement is a normal action upon the expiration of the agreement date between both parties and will not affect the normal operation of YY Live.
In early trading today (2nd), Baidu Hong Kong stocks rose more than 3% and then fell. As of noon trading, Baidu fell slightly by 0.6% to HKD 115.4 per share. Huanju Group's US stock market has not yet opened, and as of December 29, 2023, its latest stock price was $39.7 per share, up 0.81% on the same day.