Baidu's equity acquisition of YY Live ultimately failed to take shape.
On the evening of January 1st, the Hong Kong Stock Exchange announced that Baidu affiliate Moon had terminated its equity acquisition agreement with YY Live in accordance with the previously signed agreement. This means that this three-year acquisition case ended in failure.
$3.6 billion transaction
According to Baidu's latest announcement, the company has announced that Baidu (Hong Kong) Limited has entered into a share purchase agreement; According to this agreement, Baidu (Hong Kong) Limited agrees to purchase from JOYY (Huanju Group), and JOYY agrees to sell JOYY's domestic video entertainment live streaming business in China to Baidu (Hong Kong) Limited.
Baidu introduced that the share purchase agreement stipulates that the delivery of the proposed acquisition must meet certain prerequisites, including obtaining necessary government regulatory approvals and other conditions. If the proposed acquisition is not delivered before the final deadline, both the buyer and seller have the right to terminate the share purchase agreement. "As of December 31, 2023, which is the final deadline, all the delivery prerequisites stipulated in the share purchase agreement have not been fully met," Baidu said in the announcement.
According to a retrospective announcement, Baidu's acquisition of YY Live began at the end of 2020. On November 16, 2020, YY Live's parent company, Huanju Group, and Baidu signed a final binding agreement for the wholly-owned acquisition of Huanju's domestic video entertainment live streaming business (i.e. "YY Live"), with a total transaction amount of approximately 3.6 billion US dollars (subject to adjustment of the agreement's consideration).
According to the standards at that time, the delivery of the transaction depends on the delivery conditions agreed upon in the agreement and is expected to be completed in the first half of 2021. After the transaction is completed, YY Live will join Baidu, and in the future, both parties will achieve mutual empowerment in technology, traffic, ecology, and other aspects, forming economies of scale.
The acquisition case was full of twists and turns
On November 19, 2020, just after the announcement of the aforementioned transaction, the well-known short selling agency Muddy Waters Research released a short selling report, claiming that Huanju Group was a fraudulent company and stating that after a year of investigation and research, YY Live, a subsidiary of Huanju Group, was suspected of falsifying data in revenue, profits, and paid users.
In response to this, Huanju Group stated at the time that there were numerous errors in the report. Subsequently, the audit committee of Huanju Group also conducted an independent review, and the final result was that the allegations and conclusions in the Muddy Waters report were not substantiated.
In the listing documents submitted by Baidu in March 2021, it was also mentioned that Baidu conducted due diligence in financial, legal, and commercial aspects before entering into the purchase agreement related to the acquisition and after Muddy Waters published a short selling report on Huanju Group. On February 7, 2021, both parties have made modifications to some of the terms and conditions of the original share purchase agreement and entered into a revised and restated share purchase agreement.
"Considering the potential synergies that YY Live may have on our business, we believe that continuing to complete the transaction in accordance with the revised and restated stock purchase agreement is in our commercial interest," said Baidu at the time.
In addition, at the end of 2021, multiple media outlets revealed that Baidu had carried out a large-scale layoff, with live streaming and gaming businesses being the "hardest hit areas". Some argue that one of the main reasons for layoffs in these two sectors is the conflict between Baidu and YY.
Latest response from Huanju Group
Huanju Group was established in April 2005 and went public on NASDAQ in November 2012. Its core products include Bigo Live, Likee short videos, and Hago interactive social media, covering more than 150 countries and regions worldwide. According to the third quarter financial report of Huanju Group in 2023, its revenue in the third quarter was 567.1 million US dollars, a decrease of 3.35% compared to the same period last year; The net profit attributable to the parent company was 72.89 million US dollars, a year-on-year decrease of 85.85%.
According to the data, YY Live is a domestic entertainment live streaming platform that includes music, technology, outdoor, sports, games, and other content. The monthly active users on the mobile end exceed 41 million, and the signed star rated anchors exceed 1.5 million. It was originally built on a platform that enriched communication tools - YY Voice.
Regarding Baidu's termination of its purchase of YY Live, Huanju Group announced on the evening of January 1 that the sale of YY Live to Baidu was basically completed on February 8, 2021, and certain matters still need to be completed in the future. However, Baidu claimed in the notice that it had exercised its right to terminate the share purchase agreement and cancelled the transaction. In this regard, the company is seeking legal advice and will consider all options it can take in response to Baidu's notice.