Baidu, the leading Chinese technology conglomerate, has abandoned its plans to acquire US streaming provider Joyy. As stated in a prospectus, its subsidiary Moon SPV Ltd has terminated the purchase agreement because the conditions for completing the deal by the end of 2023 "were not fully met". This included the approval of government authorities, which, according to Reuters, was unlikely to be granted in 2021.
The Chinese government has tightened regulations on technology stocks in the country in recent years. As a result, Joyy has issued a statement and announced that it will seek legal assistance to explore all options regarding the cancellation of the deal. In response, Baidu's stock temporarily dropped 3.37 percent to $115.08 in NASDAQ trading on Tuesday.
The failed takeover is a blow to Baidu, which had hoped to strengthen its position in the booming streaming market through the integration of Joyy into its portfolio. Joyy, formerly known as YY, is one of the largest live streaming providers in China and has shown impressive growth in recent years. However, the Chinese government has been increasing its oversight of technology companies in the country, particularly regarding mergers and acquisitions.
This is part of China's efforts to strengthen control over the domestic market and limit the impact of foreign technology giants. The development of Baidu and Joyy also indicates the increasing difficulties for Chinese companies to complete cross-border deals, especially in the USA. The tightened regulations and strained political relations between the two countries have resulted in Chinese firms facing more and more hurdles in expanding overseas.
For Baidu, the failed acquisition of Joyy is a setback, but the company is still diversified and has further growth opportunities in other areas, such as artificial intelligence and autonomous vehicles. However, the rejection of the deal will certainly have an impact on Baidu's short-term performance and once again highlights the challenges faced by Chinese companies in international business.
