Tencent buys 36.5 pct holding in Sogou

Internet giant Tencent Holdings Ltd said on Monday it bought a stake of 36.5 percent in the Sogou, the country's third-largest search engine, for $448 million plus other assets.

The announcement came on the same day that Tencent's market capitalization exceeded $100 billion, making the company the biggest Internet corporation in Asia.

Tencent's shares rose 2.5 percent to HK$421.2 ($54.32) in Hong Kong on Monday, pushing the market value to HK$782.8 billion. Baidu Inc, the second-largest dotcom in the country, has a market capitalization of about $50 billion.

Tencent, based in Shenzhen, Guangdong, will merge Soso, its own online search platform, with Sogou, said the company.

Sohu Inc, together with its affiliates, will remain the controlling shareholder of Sogou, which will operate independently as a subsidiary of the Beijing-based Web portal.

"I believe Sogou is the ideal partner for Tencent to further develop search opportunities in China. This reinforces our open and win-win philosophies and determination in building a healthy, diversified ecosystem in the industry," said Pony Ma, chairman and chief executive officer of Tencent.

"The deal will enable us to make some significant progress in the online search sector. We will become the top innovator in the industry," said Wang Xiaochuan, chief executive officer of Sogou.

Wang will continue to lead the company after the deal closes. There was no word on any possible staff cuts.

He said the new Sogou will try to integrate its search and social networking functions to maintain an edge on the thriving mobile Internet front.

Tencent is the nation's largest instant messaging provider. It has a significant share in the online gaming market.

Analysts said that Sogou's browsers, combined with Chinese input method products, will help Tencent take on players such as Baidu and Qihoo 360 Technology Co Ltd.

Search and browser products are the biggest traffic drivers for Chinese Internet companies. With Qihoo expanding its browser and search services aggressively, every other player wants to develop a search engine embodied in its own browser, said Dong Xu, an analyst at Analysys International.

Sogou controlled more than 10 percent of China's Web-based search market as of last month, according to industry research firm Cnzz.com Inc.

Baidu, the biggest and the oldest search company, held a 63 percent market share, while the fast-rising Qihoo had 18 percent.

Sogou is also a major player in China's mobile search market, where the number of smartphone users hit 464 million at the end of June.

"Sogou remains a strategic asset of Sohu, generating synergies with our other businesses and creating significant value for shareholders," said Charles Zhang, chairman and chief executive officer of Sohu.