Modern Times Group announced that they and Huya Inc. have mutually terminated negotiations related to an agreement for forming a joint venture for esports expansion into China and a minority stake in Electronic Sports League.
Announced in September 2019, the joint venture would see Huya Inc. buying a $30 million stake in ESL. It would also allow for ESL’s expansion into the Chinese esports market. Following the announcement, ESL’s shares fell by nearly 20 percent on the stock market.
Why did it fall?
Differing views between the two parties on the allocation of contractual risk and other key commercial terms are the primary reasons for the announced termination of the binding term sheet.
When ESL announced the joint venture in September 2019, the company saw a significant rise in its share price. ESL shareholders were optimistic about the company’s future due to an easier route into the Chinese esports market. The original agreement would also allow Tencent Gaming to purchase additional shares to reach 50.1 percent of the voting power.
MTG counts ESL and DreamHack as its subsidiaries and remains focused on expansion into China.
Will ESL expand to China?
ESL’s share price plummeted amidst news of the cancellation of the joint venture. The company’s shares dropped 19.2 percent to close at 100.20 kr ($10.54), according to an EsportsObserver report.
Despite the deal falling through, ESL remains committed to expanding into China according to the official press release.
[…] Expansion into the important Chinese esport market continues to be a priority for MTG and we are looking forward to seize opportunities in the near future. – Jørgen Madsen Lindemann, CEO and President of MTG.
China is the biggest esports market and will become a $1.5 billion market by 2020, according to a Tencent Gaming report.
What are ESL’s plans for 2020?
ESL revealed details about its upcoming ESL Pro Tour for games like CS:GO, Warcraft 3 and Starcraft 2. ESL will hold talks with several CS:GO teams from Jan. 22 to Jan. 24 to finalize agreements for the upcoming ESL Pro Tour in CS:GO.
Earlier this year, Huya Inc. announced a partnership with Riot Games to stream LCS and LEC in China.
MTG plans to report its fourth-quarter 2019 and full-year financial results on February 6, 2020.
Written by Rohan Samal