Kakao Page, Kakao M to merge to become $9 bn worth entertainment giant

South Korean internet giant Kakao Corp. is creating an all-in-one entertainment giant by merging Kakao Page Corp. and Kakao M Corp., whose combined value could reach as high as 10 trillion won ($9 billion).

A plan to combine Kakao Page and Kakao M was approved by each company’s board of directors on Monday, the two companies confirmed on the same day. Each company will hold a general shareholders’ meeting on Tuesday for final approval for the merger plan. The two companies aim to complete the merger on March 1 and start anew as Kakao Entertainment.

Under merger terms, Kakao Page will put Kakao M under its arm with a merger ratio of 1.31 Kakao Page common shares per one Kakao M share.

The companies expect that the combined unit’s enterprise value could reach up to 10 trillion won. They expect their parent Kakao Corp. to seek to list the newly merged unit on the stock market as early as next year. Kakao Page has been preparing for its own initial public offering this year while internally estimating its worth at 5 trillion won.

Kakao Page is mobile content creator affiliate of Kakao, the operator of Korea’s dominant chat app Kakao Talk. It registered operating incomes of 30.6 billion won on 257 billion won revenue for full 2019 on a consolidated basis. There are 16 affiliates and subsidiaries operating under Kakao Page, which owns some 8,500 intellectual properties.

Kakao M is responsible for the entertainment business of the Kakao empire. It has seven talent agencies and four music labels plus production houses for performing arts, TV shows, and movies. It also runs its own video streaming platform called Kakao TV, which also produces shows.

When simply combined, Kakao Page and Kakao M’s total operating income would be 50 billion won on revenue of 610 billion won for full 2019.

The merger comes at a time of growing importance of original stories, especially in content creation for mobile services. Comics and fictions that start off on mobile platforms are gaining more attention amid growing popularity, and they are even reproduced as TV shows and movies for greater markets. Reflecting the trend, Korea’s other internet giant Naver Corp. recently acquired Wattpad Corp., a Canada-based online storytelling platform operator, for $600 million to create a giant content company and appeal to greater audiences.

The merger also is expected to protect Kakao from Google’s hefty commission fees for app sales. The global IT giant will require all app developers distributing software on its Google Play Store to use its app payment system in Korea from October 2022, as well as take a 30 percent fee from developers on all in-app purchased within its market.

On Tuesday, shares of Kakao closed down 2.6 percent at 461,000 won, taking a breather from five straight days of gains.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]