Chinese live-streaming platform Huya has today (Monday) agreed a strategic joint venture with Swedish media company Modern Times Group (MTG) that will see it acquire a minority stake in the latter’s esports organisation, ESL.
Huya, which is backed by Chinese media giant Tencent and has a strong interest in esports content, will acquire $30m (€27.4m) worth of primary and secondary shares in ESL in a deal that grants the company a pre-money enterprise value of $425m.
As part of the transaction, ESL will issue new shares at a value of $22m to increase capital to be used for further expansion, parts of which will be used by ESL to fund its pro rata part of the joint venture company.
MTG said the transaction will further strengthen ESL’s position as the leading and largest esports company globally, adding that the forming of a joint venture between ESL and Huya will create a natural alliance to facilitate expansion of ESL’s offering in the Chinese market. The Chinese domestic esports audience is tipped to hit 350 million, and revenues to reach $1.9bn, this year, according to a June report by Tencent’s Penguin Intelligence.
“We are excited to announce this term sheet for an important strategic partnership which provides us with a strong partner in Huya to pave the way for a successful ESL expansion into the thriving Chinese esport and gaming market in due time,” MTG president and chief executive Jørgen Madsen Lindemann, said.
Through the joint venture, MTG said ESL and Huya will build local Chinese esports competitions connected to the global ESL tournament calendar to ensure maximum Chinese esports athlete participation on a global scale.
Modern Times Group split into two entities last year following the collapse of a proposed takeover deal. Today’s news gave MTG’s share price on the Stockholm Stock Exchange a substantial boost. At 4pm GMT, MTG’s share price had risen 13.98 per cent to SEK85.94 (€7.98/$8.75).
MTG said the deal is expected to close in the fourth quarter of 2019. MTG, the majority owner in ESL, will retain this status following a completed transaction. The remaining shares in ESL are owned by the organisation’s founders.