Core Viewpoint - Tencent Music Entertainment Group announced the acquisition of 100% equity in the online audio "unicorn" Himalaya for a total consideration of approximately $28.57 billion, which reflects a significant decline from its previous valuations [1][3]. Group 1: Acquisition Details - The acquisition includes $1.26 billion in cash, issuance of A-class common stock not exceeding 5.5686% of total equity to Himalaya shareholders, and performance-based equity incentives of up to 0.37% for founding shareholders [1]. - The equity portion of the deal is valued at approximately $1.597 billion based on Tencent Music's current market capitalization [1]. Group 2: Financial Performance - From 2018 to 2022, Himalaya reported a cumulative adjusted net loss of 3.057 billion yuan, although it achieved a profit of 242 million yuan in 2023, primarily through significant layoffs [2]. - The average monthly active user growth rate has slowed considerably, with growth rates of 8.70% and 3.91% for 2022 and 2023, respectively, compared to double-digit growth from 2019 to 2021 [2]. Group 3: Investor Sentiment - Many venture capital and private equity investors have lost patience with Himalaya, as the acquisition price of $28.57 billion is roughly equivalent to its valuation during the E-2 round of financing in 2020 [3]. - Investors such as Sony Music and others who entered in later funding rounds are facing significant losses, with the largest loss reported by Medai Star International Limited at 31.4% [3]. Group 4: Strategic Implications for Tencent Music - The acquisition allows Tencent Music to fill gaps in its content ecosystem, particularly in long audio formats like audiobooks and podcasts, and to leverage synergies with Himalaya's user scenarios in automotive and smart hardware [4]. - Post-acquisition, Tencent Music will integrate its platforms, creating an audio ecosystem with over 500 million monthly active users across various formats [4].

Group 1 - Tencent Music Entertainment Group announced a cash acquisition of Himalaya for $1.26 billion (approximately 9.052 billion RMB) [1] - The acquisition terms include not exceeding 5.1986% of Tencent Music's Class A common stock and 0.37% for Himalaya's founding shareholders [2] - Following the announcement, Tencent Music's stock price increased by 3.06% to $18.51 per share [2] Group 2 - Himalaya has attempted to go public four times, with the latest IPO attempt in April 2024, facing multiple setbacks [3] - The audio sector has been challenged by skepticism regarding its profitability and growth potential, with Himalaya only achieving a net profit of approximately 220 million RMB in 2023 [6] - Himalaya's core revenue comes from subscription income, which accounts for over half of its total revenue, but its monthly active user growth was only 3.9% year-on-year in 2023 [6] Group 3 - The acquisition is seen as a strategic move for Tencent Music to enhance its position in the audio sector, as Himalaya is a leading platform in the industry [6] - Himalaya will maintain its brand, independent product operations, core management team, and strategic direction post-acquisition [6]

Core Viewpoint - Tencent Music Group is reportedly planning to acquire Himalaya, with the deal initiated two months ago and the price significantly reduced, although both companies have not confirmed the sale yet [1][3]. Group 1: Acquisition Context - The potential acquisition of Himalaya by Tencent Music is speculated to be driven by three main factors: the challenging market environment for niche audio applications, Tencent's significant influence in the audio sector, and the need for Tencent to enhance its offerings in paid audio content [1]. - Previous discussions between Tencent Music and Himalaya regarding a partnership were hindered by management control issues, but recent capital movements by Himalaya, such as a substantial increase in registered capital, are seen as signals for a possible acquisition restart [1][2]. Group 2: Company Performance - Himalaya, founded in 2012, is the largest online audio platform in China, leading in mobile listening duration and online audio revenue as of 2023 [2]. - Despite its leading position, Himalaya has faced growth challenges, with its average monthly active users increasing by only 3.9% from 2021 to 2023, compared to a 24.4% increase in 2021 [2]. Group 3: Financial Overview - Himalaya has attempted multiple IPOs, with a valuation of approximately $5 billion in 2021, but the current acquisition valuation is expected to be between $1 billion and $1.5 billion [3]. - The company's revenue from 2021 to 2023 shows a slight increase, with total revenues of 58.6 billion, 60.6 billion, and 61.6 billion respectively, while net profits fluctuated, with a significant loss in 2021 turning into a profit of 2.24 billion in 2023 due to cost-cutting measures [3][4]. - Subscription services remain the primary revenue source for Himalaya, accounting for 51.7% of total revenue in 2023, although paid content revenue has declined from 10.58 billion in 2021 to 6.94 billion in 2023 [4]. Group 4: Market Challenges - Himalaya's advertising revenue has also seen a decline, with figures of 14.88 billion, 14.49 billion, and 14.23 billion from 2021 to 2023, indicating challenges in monetizing its platform effectively [4]. - The audio app market is perceived as facing significant competition from larger platforms that can offer similar functionalities, leading to skepticism about the future growth of audio apps like Himalaya [5].

Core Viewpoint - Tencent Music Group is reportedly planning to acquire Ximalaya, with the transaction initiated two months ago and the price significantly reduced, although both companies have not confirmed the sale yet [1][2]. Group 1: Acquisition Details - Tencent Music's acquisition of Ximalaya is speculated to be driven by three main reasons: the challenging market environment for niche audio applications, Tencent's significant influence in the audio sector, and Tencent's need to enhance its offerings in paid audio content [1][2]. - Ximalaya's subsidiary recently increased its registered capital from 300 million to 2.8 billion yuan, a rise of 837.6%, which is perceived as a signal for a potential acquisition restart [1][3]. Group 2: Company Performance - Ximalaya, founded in 2012, is the largest online audio platform in China, leading the industry in terms of mobile listening duration and online audio revenue [2]. - The company has faced growth challenges, with its average monthly active users increasing by only 3.9% in 2023, compared to a 24.4% increase in 2021 [2]. Group 3: Financial Performance - Ximalaya has attempted multiple IPOs, with a 2021 valuation of approximately $5 billion, while the current acquisition valuation is speculated to be between $1 billion and $1.5 billion [3]. - From 2021 to 2023, Ximalaya's revenue figures were 5.86 billion yuan, 6.06 billion yuan, and 6.16 billion yuan, with net profits of -5.106 billion yuan, 3.7 billion yuan, and 3.736 billion yuan respectively [3][4]. - In 2023, Ximalaya achieved a positive adjusted net profit of 224 million yuan, attributed to cost-cutting measures such as layoffs and reduced marketing expenses [3][4]. Group 4: Revenue Composition - Ximalaya's revenue is primarily derived from four segments: subscriptions (51.7%), advertising (23.1%), live streaming (18.4%), and innovative products and services (6.8%) in 2023 [3][4]. - Subscription service revenue has shown slight growth, with figures of 2.992 billion yuan, 3.081 billion yuan, and 3.189 billion yuan from 2021 to 2023, maintaining a contribution of over 50% to total revenue [4]. Group 5: Market Challenges - Ximalaya's advertising revenue has declined from 1.488 billion yuan in 2021 to 1.423 billion yuan in 2023, indicating challenges in monetizing its platform due to the limitations of audio advertising [4]. - The audio app market is perceived as facing significant competition from larger platforms that can offer similar functionalities, leading to concerns about the sustainability of Ximalaya's growth [5].