Kakao and Daum to merge up via equity swap
South Korean chat app and internet portal/game publisher merger will create a company worth US$2.9 billion in market capitalisationBy Jonathan Toyad 26 May, 2014
Two South Korean tech companies will be joining forces via an equity swap: chat app creator Kakao and internet portal company Daum.
According to an announcement (via Bloomberg), the combined effort of both companies will be worth about US$2.9 billion in market capitalisation. If successful, the newly-formed Daum Kakao will be listed in October.
The merger is a way for Kakao and Daum to compete against companies like Naver Corp., the makers of chat app LINE, which also happens to be big in South Korea. Kakao CEO Lee Sirgoo said that the merger will help companies adapt in a fast-changing global market. Daum CEO Choi Sae Hoon said that Kakao’s competitiveness in mobile and Daum’s content are a good combination and will provide the best synergy.
CEO of Midas International Asset Management Heo Pil Seok said that the deal will expand Kakao beyond its mobile-based platform. “Although Kakao is using its mobile network to promote games and other applications, there’s a limit to how much it can expand in its current state. Kakao would have needed to consider a merger at some point, even if it had decided to go public on its own.” Daum too had trouble developing a way to handle mobile business; hence the merger.
Last February, Kakao was planning on filing an IPO in South Korea. Daum is publishing a rather anticipated PC game title called Black Desert, which is said to be South Korean’s mass multiplayer online equivalent to The Elder Scrolls V: Skyrim and Dark Souls (seriously, look at it; it’s beautiful). Perhaps there’s a way that Kakao and Daum can talk together to turn it into a franchise that can expand onto mobile phones. The future’s looking bright for the two.