Privately-held Kakao, the maker of South Korea’s popular Kakao Talk messaging app, is planning a merger with publicly-listed Daum Communications, the country’s second-largest internet portal.
Through the merger, Kakao believes it has a better chance of expanding overseas by tapping into the skills of Daum engineers. (More than 90 per cent of Kakao Talk’s 140 million users are based in South Korea.)
“There was a consensus that we will certainly face a limit in growing organically,” said Sirgoo Lee, Kakao co-CEO, quoted by Reuters. “It takes too much time to recruit employees one by one and to start a new business one by one. If we work with Daum, we will save time and upgrade services.”
Daum will also benefit, speculate analysts, by boosting its mobile messaging offering and competing better with the more popular Naver web portal. (Naver owns LINE, a messaging app that has about 420 million users.)
Under the terms of the agreed deal between the two companies, as reported by Reuters, Kakao shareholders will get 1.556 Daum shares for each Kakao share they own.
If the deal gets shareholder approval, the new entity – dubbed Daum Kakao – is expected to have a market capitalisation greater than KRW3 trillion ($2.9 billion) and will list in October.
Hana Daetoo Securities, in a report cited by Reuters, said Brian Kim, Kakao’s founder, would be the largest Daum Kakao shareholder with a 33 per cent stake.
Daum’s founder Lee Jae-woong, the report added, would take a 6 per cent stake in the new entity.