Kakao to raise $300m in Singapore to muster up M&A dry powder

A logo of Kakao

South Korea‘s internet giant Kakao is planning to issue $300 million worth of exchangeable bonds to accumulate the dry powder for its future mergers and acquisitions activities, the company said in a filing Thursday.

The US dollar-denominated exchangeable bonds will be issued privately on Wednesday on the Singapore Exchange.

Investors in the hybrid securities will be offered straight bonds with zero interest. Once the bonds mature in April 2023, the hybrid security investor will be offered a right to exchange the bond with a Kakao share valued at 477,225 won ($420.63), which is 35 percent higher than the closing price on the Korea Exchange as of Wednesday. The price of the exchangeable bond is subject to changes following the prescribed conditions.

The securities are open for subscription bids starting Wednesday, the filing showed. The bidding process is being underwritten by Citigroup Global Markets and JPMorgan Securities.

As a prerequisite of the transaction, Kakao will dispose of its 711,552 treasury shares, or 0.8 percent of the total amount of shares issued, by Wednesday.

The transaction comes as Kakao faces its obligation to sell off its treasury shares it had acquired through its merger with the group‘s entertainment arm Kakao M by 2023, following the Capital Markets Act in Korea.

Kakao said the company will use the proceeds to enhance its platform and content-creating business through M&As, but did not elaborate on the investment destinations.

By Son Ji-hyoung (consnow@heraldcorp.com)

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