Saudi Arabia and Singapore buy 10% of Kakao Entertainment

Kakao Entertainment raised 1.2 trillion won ($964.2 million) from Saudi Arabia and Singapore with the sale of shares to the sovereign wealth funds of the two. The audacious financing comes at a time of economic challenges globally and...

[KAKAO]

Kakao Entertainment sold 1.2 trillion won ($964.2 million) of shares to Saudi Arabia and Singapore, the sovereign wealth funds from the two countries buying more than 10 percent of the company.

The audacious financing comes at a time of economic challenges globally and for the entertainment business in specific and following a difficult year for Kakao, which owns 66.08 percent of Kakao Entertainment.

It also comes as Saudi Arabia seeks to pour more money into entertainment properties to help it hedge its dependence on oil.

In the deal disclosed Thursday, Saudi Arabia's Public Investment Fund (PIF) and Singapore's GIC sovereign wealth fund each invested 600 billion won into the company. Both purchased 2,261,677 shares and together they will own 10.21 percent of the company.

“It’s significant that we were able to secure funds of this scale at a time when both the Korean and global markets are facing a lot of uncertainty and investment sentiment has weakened,” said Kakao Chief Investment Officer and Executive Vice President Bae Jae-hyun, who led the deal.

He went on to say the transaction is a testament to the competitiveness and growth potential of Kakao Entertainment’s intellectual property (IP).

Kakao Entertainment is a webtoon and web novel company, and operates Melon, Korea's largest music streaming service.

The funds will be put toward achieving Kakao’s vision of “Beyond Korea,” where Kakao aims to become a global entertainment company. Half of the funds will be used to propel global businesses in stories, intellectual property and music, while the other half will be used for M&A, according to investment sources.

Kakao Entertainment has been actively pursuing M&A activities to build up the company's size and to buy more intellectual property.

In 2021, it bought Tapas Media and Radish Media and merged the U.S. properties into Tapas Entertainment, a webtoon and web novel-based service, in 2022. In 2021, it acquired Antenna Music, a multi-entertainment agency founded by singer song-writer You Hee-yul and representing celebrities such as Yu Jae-seok, and Melon.

Kakao Entertainment has produced a number of hits, such as drama series "Business Proposal," distributed and aired on Netflix and local broadcaster SBS, Netflix original "Narco-Saints" and "Hunt," a film released last year.

The entertainment company has a full lineup ahead this year, including "Gyeongseong Creature" and "The Match," both Netflix originals, and "The Worst of Evil," a Disney+ series.

A Kakao spokesperson commented that there are "no immediate plans" to apply for initial public offerings (IPO). The company had planned to list last year, but offering was postponed due to market stagnation and lack of profit.

GIC is already invested in Kakao Entertainment's Podotree subsidiary, which is now known as Kakao Page, through Anchor Equity Partners. Anchor Equity Partners is the second-largest shareholder of Kakao Entertainment, with a 12.43 percent stake.

PIF acquired 9.14 percent of Nexon for 2.42 trillion won early last year to become the second-largest shareholder as of April 2022. It is also the second-largest shareholder of NCSoft, with an 9.26 percent stake.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]