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com/news/articles/2014-05-26/south-korea-s-kakao-corp-to-merge-
with-daum-via-share-swap
The deal follows Facebook Inc.’s acquisition of messaging app WhatsApp Inc.
for as much as $19 billion and Rakuten Inc.’s $900 million takeover of Viber
earlier this year. The transaction also makes Kakao board Chairman Kim
Beom Su a billionaire after he co-founded Kakao, which had said it was aiming
for an IPO next year, in 2006.
Kakao decided that expanding on its own would take too long and leave the
company lagging behind competitors, Chief Executive Officer Lee Sirgoo told
reporters in Seoul today.
“Kakao’s move to possibly list itself through the merger with Daum cuts down
time and costs,” Huh Nam Kwon, chief investment officer at Shinyoung Asset
Management, said in an interview in Seoul today. “It ultimately produces
synergy for them, as the leading players in the online and offline industries
join forces.”
Daum shares were suspended from trading today as the Korea Exchange
reviews whether the merger plan meets its rules for backdoor listings,
according to today’s filing. The shares rose 6.7 percent to 78,100 won, the
highest level in more than seven weeks, on the Kosdaq index on May 23, the
last day of trading before today’s announcement. Trading volume was more
than 6 times the company’s average this year.
‘Growth Boost’
Naver Corp., an Internet portal that competes directly with Daum, fell 4
percent to 745,000 won at the close in Seoul, the steepest loss since April 7.
South Korea’s benchmark Kospi index declined 0.3 percent. WeMade
Entertainment Co., an online game maker that owns 5.6 percent of Kakao’s
preferred shares, rose by the daily limit of 15 percent.
“The merger will act as a strong growth boost for Daum, which has been
struggling to keep up with Naver,” Heo Pil Seok, chief executive officer at
Midas International Asset Management Ltd., said by phone. “Kakao would
have needed to consider a merger at some point, even if it had decided to go
public on its own.”
The number of unique visitors to Daum’s portal dropped to 26.6 million as of
the end of March from 29 million at the end of April 2010, according to
regulatory filings. That compares with 31.1 million for Naver as of the end of
March.
Asian Growth
Kakao has 140 million users of its KakaoTalk instant messaging service
application, the company said today. KakaoTalk is on 93 percent of
smartphones in South Korea and the company is investing in Southeast Asia,
mainly Indonesia, the Philippines and Malaysia, as it seeks growth, Kakao
CEO Lee said in an interview in April.
That breaks down to 23,555 won per user, based on user numbers provided by
Kakao, compared with $42 for each of WhatsApp’s 450 million members at
the time of the Facebook deal.
Kakao board Chairman Kim is Kakao’s largest shareholder with 29.9 percent,
while Kcubeholdings Co., wholly owned by Kim, holds 23.7 percent. Kim was
previously co-chief executive officer of Naver and founder of Samsung SDS
Co., according to his K Cube Ventures website.
Separate Operations
Daum’s largest shareholder is Lee Jae Woong with 13.67 percent as of March
31, according to a regulatory filing.
The companies will continue to be operated separately “for the time being,”
Daum said in a statement.
It hasn’t been decided who will run the merged company, Kakao’s Lee said
today.
Kakao competes directly with Naver-controlled Line Corp. Line, which had
400 million users as of April 1, has a target of 500 million to 600 million users
by the end of this year, Chief Executive Officer Akira Morikawa said in April.
(An earlier version of this story corrected the valuation of Kakao to include
preferred shares.)