Swedish entertainment firm Modern Times Group, which owns esports organisations ESL and DreamHack, has seen its share price tumble after terminating a proposed joint venture with Chinese live streaming service Huya.
The pair have mutually agreed not to go through with the arrangement, citing ‘differing views’ over ‘allocation of contractual risk and other key commercial terms’ as the main reasons for not proceeding with the collaboration.
The proposed partnership, which was announced in September, included plans to host and build local competitive gaming competitions in China as part of MTG’s broader objective to expand into the country.
The agreement also would have seen Huya acquire a US$30 million minority stake in ESL in a deal that would have valued the esports organiser at US$425 million. Additionally, ESL planned to issue new shares at a value of US$22 million to increase capital to facilitate further expansion.
However, news that the partnership had been terminated saw MTG’s share price on the Stockholm Stock Exchange drop more than 15 per cent.
MTG noted that the cancellation of its term sheet with Huya would have ‘no operational impact’ on ESL in 2020, adding that it plans to report its financial results for 2019 in February.
“We still believe in the logic of this transaction and its potential for both MTG, Huya, and for the esports industry globally,” said Jørgen Madsen Lindemann, MTG’s chief executive and president. “However, both parties see a mutual termination of the negotiations as the only way forward for now given the status of the negotiations at this stage.
“With that said, 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.”
The announcement comes shortly after Tencent-backed Huya acquired exclusive rights in China to Riot Games’ League of Legends North American Championship Series (LCS) and European Championship (LEC) through 2020.