Tencent takes 15.7% stake in Kingsoft

Updated: 2011-07-08 10:56

By Mark Lee (China Daily)

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HONG KONG - Tencent Holdings Ltd, China's biggest Internet company, agreed to buy a 15.7 percent stake in Kingsoft Corp for HK$892 million ($115 million) to expand in computer-security services.

Tencent will buy 111.5 million shares from Kingsoft Chief Executive Officer Kau Pak Kwan and 66.9 million shares from Cheung Shuen Lung, a non-executive director, Kingsoft said in a filing to Hong Kong's stock exchange on Tuesday. The deal was completed Wednesday, Kingsoft said.

The purchase builds on Tencent's leadership in China's online-games and instant-messaging markets as the Shenzhen-based company boosts spending on services including computer security and electronic commerce. Kingsoft and Tencent together account for more than 20 percent of the local market for security software, second only to Qihoo 360 Technology Co, according to Morgan Stanley.

"Online security has become more important in China," Morgan Stanley analysts including Richard Ji wrote in a report on Tuesday. The Kingsoft deal is "positive" for Tencent, according to the report.

Tencent has gained 28 percent this year, trailing Chinese Internet stocks including Baidu Inc and Sina Corp.

The company will double to 10 billion yuan ($1.5 billion) the size of a fund it set up this year to invest in technology developers, Chief Executive Officer Ma Huateng said last month. The company purchased a 16 percent stake in Elong Inc in May to expand in online travel, after buying control of US-based Riot Games Inc in February.

Tencent will target growth in Internet security, e-commerce, search engines and social media this year, Ma said in March.

Kingsoft, based in Beijing, offers products including office software, Internet security and online games. It has research centers in cities including Beijing, Zhuhai, and Chengdu, according to its website.

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