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Mobile service Kakao swallows web portal Daum

Updated May. 27, 2014 08:41

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Kakao Corp, the operator of mobile messenger service KakaoTalk, and Daum Communications Corp., Korea’s second largest web portal, have announced a merger into “Daum Kakao” on Monday. The combined market capitalization of the two companies amounts to around 4.2 trillion won (4.1 billion U.S. dollars). The deal is the largest merger in the Korean IT industry and is also the first case in which a mobile service provider takes over a web portal.

In the corporate filing, Daum said, “Each company held a board of directors meeting on May 23 and resolved the merger and signed a merger agreement.” In the merger, Daum’s stock value was 72,910 won (71.24 dollars) and Kakao’s value was 113,429 won (110.82 dollars). Daum will issue shares with a swap ratio of 1:1.556 to Kakao.

The merger appears to be a takeover of Kakao by Daum. In fact, Kakao, an unlisted company, takes over Daum, a listed company, for a backdoor listing because Daum’s market capitalization is only 1.059 trillion won (about 1,034 million dollars) and Kakao is valued at around 3.2 trillion won (3.13 billion dollars). The Internet industry says, “It is an iconic event that shows that the major trend of the IT industry has moved to the mobile business.”

The merger will give Kim Beom-soo, chairman of Kakao Corp., a 38.9 percent stake in Daum Kakao, making him the largest shareholder of the new entity. Lee Jae-woong, Daum’s founder, will be only around 3.4 percent, meaning that he has to hand over management control. The two companies plan to obtain approval in the shareholders’ meeting in August and finalize the merger process within this year.