South Korea’s Daum And Kakao To Merge In £1.7bn Deal

Listed South Korean search giant Daum Communications is to merge with mobile messaging service provider Kakao in a deal that is expected to help the two companies compete against the company’s largest Internet and mobile company, Naver.

The deal, one of several major buyouts involving mobile messaging companies that have occurred recently, is expected to create a new company worth 3.4 trillion won (£1.9bn), the second-largest company ever to be listed on South Korea’s KOSDAQ.

Intensified competition

Under the all-share deal, which values Kakao at more than 3 tn won, Daum will issue 43 million new shares to Kakao stockholders, including 33 million common shares. The firms said in a statement they plan to hold a shareholders’ meeting in August, and to launch the combined company in October. Under the deal, Kakao is to drop plans to hold a flotation in Korea next year.

The companies said their two businesses mutually complement one another.

“We can secure growth of our internet business by taking advantage of Kakao’s mobile traffic while Kakao can also strengthen its mobile service with Daum’s specialised workforce, technology, content and platform,” Daum said in an official regulatory filing.

The deal follows a series of major deals involving mobile messaging, seen as key to gaining the attention of users in the rapidly expanding mobile Internet market; those deals included Facebook’s purchase of WhatsApp for $19bn (£12bn) in February.

International growth

The merger is intended to increase competition against Naver, the largest Internet portal, which also operates the Line mobile messaging service, as well as boosting expansion overseas.

Kakao operates South Korea’s most popular mobile messaging service, KakaoTalk, which is installed on more than nine out of 10 smartphones in the country. The service has about 145 million users across Asia, including Indonesia, Malaysia and the Philippines: that is about one-quarter of the user base of WhatsApp, but, unlike the US service, KakaoTalk also forms the basis for a social media platform. Kakao’s advertising business is, however, considered relatively weak.

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