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Sohu.com Inc. Chairman and CEO Issues Letter to Stockholders Regarding Special Meeting

May 17, 2018 at 6:00 PM EDT

BEIJING, May 17, 2018 /PRNewswire/ -- Dr. Charles Zhang, the founder, Chairman, and CEO of Sohu.com Inc. (NASDAQ: SOHU), China's leading online media, video, search and gaming business group, today issued to Sohu's stockholders the following letter regarding the special meeting of Sohu's stockholders scheduled for May 29, 2018:

Sohu.com logo

Dear fellow Sohu.com Inc. stockholders,

I am the founder, Chairman, and CEO of Sohu.com Inc. (NASDAQ: SOHU) ("Sohu Delaware"), China's leading online media, video, search, and gaming business group. By now you should have received our Notice of Special Meeting of Stockholders (the "Special Meeting") and the joint Proxy Statement/Prospectus of Sohu Delaware and our Cayman Islands subsidiary Sohu.com Limited ("Sohu Cayman").  You may also access and review the Proxy Statement/Prospectus on the SEC's EDGAR site at https://www.sec.gov/edgar/searchedgar/companysearch.html under "SOHU COM INC" and "Sohu.com Ltd."

The Proxy Statement/Prospectus is with respect to our solicitation of Sohu Delaware stockholder approval of a proposal for the dissolution of Sohu Delaware (the "Liquidation") and adoption of a plan of complete liquidation and dissolution of Sohu Delaware, pursuant to which, among other things, Sohu Delaware will be dissolved; all outstanding shares of the common stock of Sohu Delaware will be cancelled, and American depositary shares (the "ADSs") representing ordinary shares of Sohu Cayman will be distributed to the stockholders of Sohu Delaware on a pro rata basis (the "Liquidation Proposal").

As the May 29, 2018 date for the Special Meeting is fast approaching. I am writing to encourage you, if you have not already done so, to vote "FOR" the Liquidation Proposal and the related proposal to adjourn the Special Meeting to another date, time, or place, if necessary for the purpose of soliciting additional proxies to vote in favor of the Liquidation Proposal.

I expect that the implementation of the Liquidation Proposal will result in substantial benefits for Sohu and our stockholders. If it is approved by our stockholders and implemented, the Liquidation Proposal will result in the domicile of the top-tier, publicly-traded holding company of the Sohu Group changing from Delaware to the Cayman Islands. After the Liquidation Proposal is implemented, the Sohu Group's business, operations, and assets will be very much the same as they are now. Instead of shares of common stock of Sohu Delaware, you will own the ADSs, which will be listed and traded on the NASDAQ Global Select Market under the same "SOHU" symbol that is now used for the shares of the common stock of Sohu Delaware.  There should be no interruption in trading, as trading in the ADSs is expected to commence on the first trading day after the Liquidation Proposal is implemented.

I want to emphasize to you that one of the core reasons for the Liquidation Proposal is to establish a more efficient holding company structure that we expect will generate significant economic benefit for the Sohu Group and our stockholders over the long term while maintaining strong corporate governance. The Sohu Group has no operations, management, or employees in the U.S.  Therefore, we believe that it is quite inefficient for the top-tier holding company of the Sohu Group to be domiciled in the U.S.

Following the implementation of the Liquidation Proposal, the Sohu Group will no longer be subject to U.S. corporate income tax. I would like to highlight a few key points in this regard that I believe are very important in considering the long-term value of your investment in the Sohu Group:

  • If we do not implement the Liquidation Proposal, Sohu Delaware, even though it has no U.S. operations, will be subject to U.S. corporate tax on certain income of its foreign subsidiaries, such as rents, royalties, interest, dividends, and gain from disposal of investments, that falls under Subpart F of the U.S. Internal Revenue Code. 
  • If we do not implement the Liquidation Proposal, Sohu Delaware will also be subject to a new tax imposed by the U.S. federal tax legislation ("U.S. Tax Reform") that was signed into law on December 22, 2017 on global intangible low-taxed income (or "GILTI") of its foreign subsidiaries.  
  • If our top-tier holding company continues to be domiciled in the U.S., in many future years we should expect to be taxed under Subpart F and/or to be liable for some payment on GILTI.
  • One example of the impact for the Sohu Group if the Liquidation Proposal is not implemented, and we continue to be subject to U.S. corporate tax on Subpart F income, is our interest in our subsidiary Sogou Inc. Based on the closing market price for Sogou's American depositary shares on the New York Stock Exchange of $9.50 on May 15, 2018, Sohu's 33% interest in Sogou is valuable -- approximately $1.25 billion. Sohu Delaware, as a U.S. corporation, would be subject to U.S. corporate tax under Subpart F if our subsidiary that holds the Sogou shares sold any of those shares at a price higher than the adjusted tax basis in the shares. Subpart F income is currently taxed at the rate of 21%. Although we have no present intention of selling any of Sohu's Sogou shares, we believe that this, along with the other ongoing U.S. tax effects under Subpart F and GILTI tax if our top-tier holding company were to continue as a U.S. corporation, are nevertheless very important matters to consider in evaluating the benefits of the Liquidation Proposal.
  • If we do not implement the Liquidation Proposal now, depending on Sohu's market value and other future events, it could be difficult to implement in the future without material tax costs for Sohu Delaware and its subsidiaries, which could mean that we would be locked into the burdens of the U.S. Subpart F and GILTI tax regimes indefinitely.

I also want to emphasize that Sohu's commitment to good corporate governance has not changed and will not change after we are domiciled in the Cayman Islands. I believe that stockholders who focus solely on the differences between Delaware law and Cayman Islands law, or between SEC reporting by a U.S. corporation and SEC reporting by a foreign private issuer, will be missing some of the core reasons why this proposed change in the domicile of our top-tier holding company will be financially beneficial to Sohu and its stockholders, and will also tend to overlook the efforts we have made to carry over various stockholder protections into Sohu Cayman. For example, a stockholder who reviews the Proxy Statement/Prospectus carefully will note that we have indicated that we will continue to have independent audit, nominating, and compensation committees; hold annual meetings of shareholders; and provide certain other key shareholder protections, such as a right to nominate directors and make shareholder proposals, that are not ordinarily required for foreign private issuers or Cayman Islands companies.

Your vote is important! We urge you to consider the likely significant financial benefits of implementing the Liquidation Proposal as summarized in this letter, and to vote "FOR" both of our proposals, in accordance with the recommendation of Sohu Delaware's Board of Directors.

      Sincerely,

      Dr. Charles Zhang
      Chairman and Chief Executive Officer

If you have questions about how to vote your shares, please contact:

In the United States: 
+1-800-509-0984

In China:
Tel: +86(10) 5660-3068 / +86(10) 6272-5694
E-mail: ir@contact.sohu.com

About Sohu.com

Sohu.com Inc. (NASDAQ: SOHU) is China's premier online brand and indispensable to the daily life of millions of Chinese, providing a network of Web properties and community based/Web 2.0 products which offer the vast Sohu user community a broad array of choices regarding information, entertainment and communication. Sohu has built one of the most comprehensive matrices of Chinese language web properties and proprietary search engines, consisting of the mass portal and leading online media destination www.sohu.com; the interactive search engine www.sogou.com; the developer and operator of online games www.changyou.com/en/ and the leading online video Website tv.sohu.com .

Sohu's corporate services consist of online brand advertising on Sohu's matrix of websites as well as bid listing and home page on its in-house developed search directory and engine. Sohu also provides multiple news and information services on mobile platforms, including Sohu News App and the mobile news portal m.sohu.com. Sohu's online game subsidiary, Changyou.com (NASDAQ: CYOU) develops and operates a diverse portfolio of PC and mobile games, such as Tian Long Ba Bu ("TLBB"), one of the most popular PC games in China. Changyou also owns and operates the 17173.com Website, a leading game information portal in China. Sohu's online search subsidiary Sogou (NYSE: SOGO) has grown to become the second largest search engine by mobile queries in China. It also owns and operates Sogou Input Method, the largest Chinese language input software. Sohu.com, established by Dr. Charles Zhang, one of China's internet pioneers, is in its twenty-second year of operation.

For investor and media inquiries, please contact:

In China:

 

Mr. Eric Yuan

Sohu.com Inc.

Tel:

+86 (10) 6272-6593

E-mail:

ir@contact.sohu.com

   

In the United States:

   

Ms. Linda Bergkamp

Christensen

Tel:

+1 (480) 614-3004

E-mail:

lbergkamp@christensenir.com

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Sep 6, 2018
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SOHU.COM LIMITED

NOTICE OF THE ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD ON THURSDAY, SEPTEMBER 6, 2018

 

Notice is hereby given that the Annual General Meeting of Shareholders (the “2018 Annual Meeting”) of Sohu.com Limited (the “Company”) will be held at Level 2, Sohu.com Media Plaza, Block 3, No. 2 Kexueyuan South Road, Haidian District, Beijing, People’s Republic of China, on Thursday, September 6, 2018 at 10:00 A.M. China time, to consider and act upon the following matters:

 

  1. To elect the following nominees to the Company’s Board of Directors (the “Board”) as Class I Directors, each to hold office until the second succeeding annual general meeting of shareholders and until his successor is duly elected or appointed, or until his resignation or removal: 

Charles Zhang

Zhonghan Deng

Dave De Yang

 

  1. To ratify the appointment of PricewaterhouseCoopers Zhong Tian LLP as the Company’s independent auditors for the fiscal year ending December 31, 2018.

  

  1. To consider and act upon all other matters which may properly come before the 2018 Annual Meeting or any adjournment or postponement thereof.

 

The Board consists of six directors, and is divided into Class I Directors and Class II Directors, with three directors in each class. Class I Directors are to initially serve until the 2018 Annual Meeting and for each successive term expiring at the second succeeding annual general meeting thereafter and Class II Directors are to initially serve until the next annual general meeting immediately following the 2018 Annual Meeting and for each successive term expiring at the second succeeding annual general meeting thereafter.

 

The Board has nominated Charles Zhang, Zhonghan Deng, and Dave De Yang, who are currently designated as Class I Directors and whose terms will expire at the 2018 AGM, to stand for election as Class I Directors. The Board knows of no reason why any of the nominees would be unable or unwilling to serve, but if that should be the case, proxies will be voted for the election of substitute nominee(s) selected by the Board, or the Board will fix the number of directors at a lesser number. The proxies may not be voted for a greater number of persons than the number of nominees named in item 1 above. The three nominees receiving a plurality of the votes cast by the shareholders represented at the 2018 Annual Meeting in person or by proxy will be elected as Class I Directors.

 

The Board recommends that shareholders vote “FOR” election to the Board as Class I Directors of each of the nominees listed in item 1 above and “FOR” item 2 above at the 2018 Annual Meeting. Your vote is very important to the Company.

 

The Board has set the close of business U.S. Eastern time on Wednesday, August 1, 2018 as the record date (the “Record Date”) for the purpose of determining the shareholders entitled to notice of, and to vote at, the 2018 Annual Meeting or any adjournment(s) thereof.

 

On May 31, 2018, effective at 4:30 PM Eastern Time (such date and time, the “Effective Time”), pursuant to a proposal for the dissolution of Sohu.com Inc., a Delaware corporation (“Sohu Delaware”), and adoption of a plan of complete liquidation and dissolution of Sohu Delaware that was approved by the stockholders of Sohu Delaware at a special meeting of stockholders held on May 29, 2018, Sohu Delaware was dissolved; all outstanding shares of the common stock of Sohu Delaware were cancelled; American depositary shares (“ADSs”) representing all outstanding ordinary shares (“Ordinary Shares”) of the Company were distributed by Sohu Delaware on a share-for-share basis to the stockholders of Sohu Delaware as of immediately prior to the Effective Time; and the Company replaced Sohu Delaware as the top-tier, publicly-traded holding company of the group of subsidiaries and variable interest entities that had been held by Sohu Delaware prior to the Effective Time.

 

From and after the Effective Time, the business, operations, and assets of the Company and its subsidiaries and variable interest entities have been substantially the same as the business, operations, and assets of Sohu Delaware and its subsidiaries and variable interest entities immediately prior to the Effective Time.

 

The Annual Report on Form 10-K of Sohu Delaware for the fiscal year ended December 31, 2017, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2018 (the “Form 10-K”), and Amendment No. 1 to Annual Report on Form 10-K, filed by Sohu Delaware with the SEC on April 2, 2018 (the “Form 10-K Amendment,” and together with the Form 10-K, the “Sohu Delaware Form 10-K”), are available for your viewing and downloading at the Company’s website at:

http://investors.sohu.com/SEC file/2018 10-K.pdf

http://investors.sohu.com/SEC file/2018 10-K/ Amendment.pdf

 

A hard or soft copy of the Sohu Delaware Form 10-K will be provided to you at no charge upon your request. Please notify the Company in your request of (i) your mailing address if you request a hard copy of the Sohu Delaware Form 10-K, or (ii) your email address if you request a soft copy of the Sohu Delaware Form 10-K. You can send your request to the Company by mail or e-mail at:

 

Sohu.com Limited

Level 18, Sohu.com Media Plaza

Block 3, No. 2 Kexueyuan South Road, Haidian District

Beijing 100190, People’s Republic of China

Attention: Eric Yuan, Investor Relations

Email: ir@contact.sohu.com

Tel: +86 (10) 6272-6593

 

In addition to the other information included in the Sohu Delaware Form 10-K, you will find in the Form 10-K Amendment biographies of the incumbent members of the Board, including biographies of the three Class I Directors, Dr. Charles Zhang, Dr. Zhonghan Deng and Mr. Dave De Yang, who are standing for election to the Board at the 2018 Annual Meeting.

 

Whether or not you plan to attend the 2018 Annual Meeting, please complete, date, sign and return the enclosed proxy attached hereto as Exhibit A promptly in the enclosed, pre-addressed envelope provided for that purpose. 

 

A holder of the Company’s ADSs may instruct The Bank of New York Mellon (the “ADR Depositary”) to vote the outstanding Ordinary Shares represented by such holder’s ADSs by completing pursuant to the instructions and procedures of the ADR Depositary the voting card furnished to holders of ADSs by the ADR Depositary.

 

You are cordially invited to attend the 2018 Annual Meeting.

 

                                                                       

By Order of the Board of Directors,

____________________________

                                                                       

Charles Zhang           

Chief Executive Officer