The deal is expected to close within the first half of 2021 and will see DouYu become a subsidiary of Huya.
"Huya will acquire all the outstanding shares of DouYu, including ordinary shares represented by American depositary shares, through a stock-for-stock merger," reads the announcement.
Upon completion of the merger, chief executives Rongjie Dong and Shaojie Chen of Huya and DouYu, respectively, will become co-CEOs of the combined company. Furthermore, the board of directors members from Huya will continue to serve after the merger goes through.
Once the merger has been completed, Tencent will hold a 67.5 per cent stake in the new company.