Naver's equity swaps reward strategic partners handsomely via stock gains

Corporate partners to Naver Corp. have netted near $1 billion in profit from their equity-based alliance with the Korea’s top internet company thanks to surge in the stock value during the pandemic period.

According to multiple sources from the investment industry on Sunday, Mirae Asset Group, CJ Group, and Shinsegae Group that hold Naver’s shares through equity swap deals have been enriched by 2.3 trillion won ($1.9 billion).

In 2017, Naver struck an equity swap with the country’s top securities firm Mirae Asset, in which Mirae Asset received 500 billion won worth of Naver shares at 177,600 won apiece. Its Naver holdings valued 1.15 trillion won as of Friday closing as Naver shares more than doubled to 407,500 won since.

CJ and Shinsegae each exchanged shares with Naver in October and March, respectively, and equally reaped big.

The value of Naver shares held by CJ Group companies – CJ ENM, CJ Logistics, and Studio Dragon – surged over 40 percent to 860 billion won over the past year. Shinsegae International and E-Mart that exchanged their shares into Naver in March also saw their holdings appreciate 6.4 percent to 266 billion won.

Naver, which invested the same amount of money in each partner, on the other hand, has not been so lucky. Shares of Mirae Asset Securities skidded more than 16 percent over the same period, pulling down its equity valuation from 500 billion won to 419 billion won.

The valuation on CJ shares held by Naver gained 11 percent. Naver invested 150 billion won in CJ ENM and Studio Dragon whose equity value rose to 179 billion won and 212.7 billion won, respectively. The valuation on CJ Logistics stock, however, fell from 300 billion won to 278.4 billion won.

Naver invested 150 billion won in E-Mart and 100 billion won in Shinsegae International, which are worth 137.2 billion won and 84.1 billion won each.

Still business-wise, the strategic partnership paid off well for Naver.

Asia Growth Fund created jointly by Naver and Mirae Asset has invested over 800 billion won in Asian ventures, including 170 billion won in Southeast Asia’s ride-hailing giant Grab, 56 billion won in Indonesia’s fintech startup Bukalapak, 60 billion won in Indian online grocery firm BigBasket, and in Vietnam asset management firm VinaCapital. They are promising startups in Asia, raising expectations for high returns.

Naver provides cloud service to Mirae Asset while the latter arranges loans to Naver Smart Store vendors and payment settlement service.

Its ties with CJ and Shinsegae are yet to bear fruit. Naver has invested in logistics software and Tving content in CJ. The plan to create a 100 billion won joint investment fund has yet to be realized. So far their alliance is restricted to EMart grocery shopping service on Naver Smart Store.

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