Kakao to acquire top music streaming firm

Kakao, the operator of KakaoTalk, which is the most popular messenger in Korea, will acquire LOEN, the operator of popular music-streaming service MelOn. The acquisition will be the second largest in scale following the deal that Kakao made when it merged Daum Communications in October 2014.

On Monday, Kakao announced that it is planning to buy a 76.4 percent stake worth 1.87 trillion won (1.55 billion dollars) in the music content operator. Kakao said it will acquire 61.4 percent of the stake from Star Invest Holdings Limited, the largest stakeholder of LOEN, and 15.0 percent from SK Planet, the second largest shareholder.

Kakao is seeking to strengthen its competitive edge by providing the music content to its platform (KakaoTalk) while utilizing LOEN’s K-Pop content as the stepping stone to entering global market. “The combination of Kakao’s mobile platform and LOEN’s music content will generate an infinite synergy. It is a great opportunity to make inroads into the global market," Kakao CEO Lim Ji-hun said.

To secure the acquisition funds, Kakao will have 6.91 million and 3,339 stocks of its own issued by an assigned third party and procure 754.4 billion won (625.2 million dollars). This will make Star Invest Holdings an owner of 5.55 million and 5,872 stocks of Kakao, making it the third largest stakeholder following Tencent (8.4 percent).

SK Planet is mulling over whether it will sell its stocks in LOEN (15.0 percent) to Kakao. One option will be to sell the stocks to Kakao under the same conditions as Star Invest Holdings did, and the other is to remain LOEN’s shareholder.

For the remaining acquisition funds worth 1.12 trillion won (928 million dollars), Kakao will secure the money through inducing investments and getting financial loans while tapping into the cash assets worth 750 billion won (621 million dollars). The deadline for the transaction is by February 29.