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Eric Ng

More mergers and acquisitions among mainland-based Chinese-language portals are expected after Sohu.com's takeover of Chinaren.com.

Sohu.com yesterday announced it would buy Chinaren .com's entire share capital by issuing 4.4 million new shares to its shareholders.

The deal, which will form the mainland's largest Web portal, was worth US$30.8 million at Sohu.com's closing share price on Wednesday of US$7.

The combined entity will have 7.8 million registered users and 44 million daily page-views upon completion of the deal expected in the fourth quarter this year.

Chinaren.com claims to have 18 million page-views a day and three million registered users. Sohu.com, meanwhile, is one of the mainland's three most popular Web sites, according to industry surveys.

It offers news, e-commerce, a messaging service and one of

the most established Chinese-language search engines.

Chinaren.com - one of the most popular youth-oriented mainland Web sites - was launched late last year.

SG Securities analyst Jonathan Iu said the acquisition represented a continuation of the consolidation trend among mainland-related portals, after Tom.com took over 163.net  - one of the mainland's 10 most popular Web sites - earlier this month.

'I wouldn't be surprised to hear similar announcements by [portal] Sina.com in the next month or two,' he said.

Analysts said mergers and acquisitions were the fastest way for portals to grow, allowing them to add registered users and page-views instantly.

They expect more Internet companies to search for market exits and become part of the largest portals, following the Chinaren.com deal.

Sharply lower valuations after the stock market correction in the sector have hastened the changing of hands of Internet assets.

Jay Chang, senior associate of Asian equities research at Credit Suisse First Boston, said that after Chinaren.com's sale, few, if any, private Internet companies with comparable brand recognition and popularity would be left in the market.

This could mean Sina.com - the second-largest portal and previous market leader - may have to acquire more than one Internet company to regain its No 1 spot.

'I think it's too early to say who will become the market leader in the longer term,' Mr Iu said.

Sohu.com chief executive Charles Zhang said that, although the acquisition of Chinaren.com would increase the cash expenses of the combined entity, he expected this to be offset by the first quarter next year.

This would be thanks to additional revenues and costs savings stemming from the takeover.

Analysts said the two companies could reap synergies by cross-marketing their services  and sharing administrative and information technology costs.

Mr Zhang said there would be no staff redundancy plan following the merger, as Chinaren .com's staff would be integrated into Sohu.com's operation. Sohu.com had added 100 people in the second quarter alone, he said.



Sohu.com to fuel trend with Chinaren takeover