Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

HK Type 4 license through Ballingal Investment Advisors Ltd. 

I'm a highly experienced sell-side analyst with in excess of 22 years of covering Asia Pacific equities, the past 19 years immersed in event strategies encompassing M&A risk arbitrage, directional long/short, stub trades and restructuring.  

My background also includes accountancy (liquidation/bankruptcy/receivership) earlier in my career and as a chief financial officer of a global commodity company based in the US and Mexico.

Pan-Asia Catalysts/Events

Tencent/Sogou: And That's (Finally) A Wrap

Sohu.com (SOHU US): Cashed Up As Tencent/Sogou Merger Completes

Negative EVs: JOYY & Sohu's Steep Discount To Net Cash

Sogou/Tencent: The Latest Chinese Internet Privatisation

Sogou/Tencent: Anti-Trust Wobble As Deal Nears Finish Line

Quiddity Advisors

Event-Driven

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<p>Back on the 27 July, Chinese search-engine <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a>, majority-owned by <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a>  and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115257193&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=6-K&amp;dateFiled=2020-09-29&amp;CK=1713947" target="_blank" rel="noopener">entered</a> into a definitive agreement for a "Going-Private Transaction" at US$9/share.</p>
<p>Additionally, Sohu entered into a SPA with Tencent concerning its stake in Sogou, which would result in Tencent holding not less than 90% of the voting power in Sogou. Therefore the Merger would be a short-form merger - there is no vote. Dissenting rights will, however, now be afforded following the Grand Court of  Cayman Islands ruling handed down on the 28 January this year and discussed in <em><a href="https://skr.ma/H7E1t" target="_blank" rel="noopener">Changyou (CYOU US): Short-Form Merger Dissent Now Permitted</a></em>. Sohu's privatisation of Changyou competed on the 17 April.</p>
</div><div>
<p>The deal appeared to be a lock, until Sogou's 1 December <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115473750&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=SC+13E3%2FA&amp;dateFiled=2020-12-01&amp;CK=1713947" target="_blank" rel="noopener">SEC filing</a>, wherein the termination date for the SPA was pushed out to 31 July, from 29 March previously, to allow clearance from the PRC regulatory authorities, specifically State Administration for Market Regulation or SAMR.</p>
<p>What seemed an ample extension at the time now appears less assured as SAMR bears down on the tech sector. </p>
<p>This muddies when (and potentially if) the merger goes through. Plus the knock-on effect to Sohu which would pocket ~US$1.2bn under the merger compared to its current maker cap of ~US$0.7bn.</p>
<p>But Tencent is unlikely to walk - not at this Offer price. </p>
</div><div><p>More below the fold.</p></div>


Back on the 27 July, Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US)  and Tencent Holdings (700 HK), entered into a definitive agreement for a "Going-Private Transaction" at US$9/share.
Additionally, Sohu entered into a SPA with Tencent concerning its stake in Sogou, which would result in Tencent holding not less than 90% of the voting power in Sogou. Therefore the Merger would be a short-form merger - there is no vote. Dissenting rights will, however, now be afforded following the Grand Court of  Cayman Islands ruling handed down on the 28 January this year and discussed in Changyou (CYOU US): Short-Form Merger Dissent Now Permitted. Sohu's privatisation of Changyou competed on the 17 April.

The deal appeared to be a lock, until Sogou's 1 December SEC filing, wherein the termination date for the SPA was pushed out to 31 July, from 29 March previously, to allow clearance from the PRC regulatory authorities, specifically State Administration for Market Regulation or SAMR.
What seemed an ample extension at the time now appears less assured as SAMR bears down on the tech sector. 
This muddies when (and potentially if) the merger goes through. Plus the knock-on effect to Sohu which would pocket ~US$1.2bn under the merger compared to its current maker cap of ~US$0.7bn.
But Tencent is unlikely to walk - not at this Offer price. 
More below the fold.

Sohu/Sogou: Persuasive Situation Amid Ongoing Antitrust Investigations