Tencent raises $ 3 billion by cutting stake in Shopee owner Sea

A logo for Tencent can be seen at the booth at the China International Fair for Trade in Services (CIFTIS) in Beijing, China on September 4, 2020. REUTERS / Tingshu Wang

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SINGAPORE, January 5 (Reuters) – Chinese gaming and social media company Tencent Holdings Ltd (0700.HK) has raised $ 3 billion by selling 14.5 million shares for $ 208 each in Sea, which owns the e-commerce company Shopee, according to a term sheet seen by Reuters on Wednesday.

Tencent said late on Tuesday that it had reached an agreement to reduce its stake in the Singapore-based gaming and e-commerce group to 18.7% from 21.3%. The company plans to retain the significant majority of its stake in Sea in the long term.

The sale comes after Tencent last month said it would sell $ 16.4 billion of its stake in (9618.HK), weakening ties with China’s second-largest e-commerce company, amid pressure from Beijing’s broad regulatory cuts against technology companies. read more

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Shares of shares fell 11.4% on Tuesday in New York to 197.8 dollars after the disposal news. Prior to the announcement, Sea said that Tencent had also agreed to cut its voting share in the company to less than 10%.

“We believe that lower voting rights can reduce any potential conflict if Tencent’s gaming team plans to publish more games directly in global markets and help reduce any geopolitical friction if / when Sea plans to expand more strategically into new markets in more countries. “Citis analysts said in a report on Wednesday.

Sea said that Tencent and its affiliates had given an irrevocable notice to convert all Class B ordinary shares.

Upon conversion, all outstanding B shares in Sea will be advantageously owned by Forrest Li, founder, chairman and CEO of Sea, Southeast Asia’s most valued company, which has a market value of $ 110 billion.

Tencent and Sea declined to comment on the pricing of the share sale.

Guotai Junan International analyst Vincent Liu said he did not view Tencent’s move to cut its stake in Sea as surprising, given the recent sale of Tencent owns a huge, diversified investment portfolio, so buying or selling shares in its invested companies can be considered a “common act,” he said.

“On the other hand, we believe that this reflects some of Tencent’s adjustments in business strategy, especially in the context of the tightening of antitrust regulations,” he added.

Seas shares have fallen 47% from a record high of $ 372 in October, but have continued to increase fivefold in the last three years.

The company started as a gaming company in 2009 and then diversified into e-commerce and food delivery, taking advantage of the roaring demand for its services from consumers, especially under pandemic-related restrictions.

Sea is now expanding its e-commerce business globally. read more

“The sale gives Tencent resources to finance other investments and social initiatives,” Tencent said in a statement.

It sold the stock at the lower end of the $ 208- $ 212 per share range when the deal was launched on Tuesday. The price that was set was a discount of 6.8% compared to Sea’s closing price of 223.3 dollars on Monday.

Tencent’s shares fell 3.5% on Wednesday in a broader market, weighed down by technology stocks.

Tencent will be subject to a lock-in period that limits the resale of Sea shares by Tencent over the next six months.

Separately, Sea proposes to increase the voting power of each Class B ordinary share to 15 votes from three.

“The board believes that as Sea has scaled significantly to become a leading global consumer internet company, it is in the company’s best interest to pursue its long-term growth strategies to further clarify its capital structure through the planned changes,” it said.

Sea said the changes must be approved by shareholders.

It said that once the changes are made, the outstanding ordinary Class B shares favorably owned by Li are expected to represent about 57% of the vote, up from about 52%.

Individually, Li has about 54% of the total voting power related to the size and composition of Sea’s board.

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Reporting by Anshuman Daga in Singapore, Kane Wu and Scott Murdoch in Hong Kong and Nivedita Balu in Bengaluru; Additional reporting by Brenda Goh in Shanghai; Edited by Shri Navaratnam and Stephen Coates

Our standards: Thomson Reuters Trust Principles.

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