Kakao to spur business growth in North America after SM acquisition

Kakao Pangyo Agit [Courtesy of Kakao]

South Korea’s platform giant Kakao Corp. that is set to take over SM Entertainment Co. is gearing up to expand business in North America with new projects based on synergy from the acquisition.

According to the information technology (IT) industry on Tuesday, Kakao will hold a shareholders meeting on March 28 and seek approval for an organizational realignment to focus on future growth engines.

Under the reshuffle plan, Bae Jae-hyun, chief investment officer at Kakao, will be appointed as a new inside director, and Attorney Shin Sun-kyung as an outside director.

Bae, who was in charge of the acquisition of SM Entertainment, had previously led the acquisition of music streaming platform Melon and 1.2 trillion won ($924 million) in overseas investment.

“Bae will play a key role in many areas such as by presenting opinions on key management issues based on his strong understanding and expertise in the business,” Kakao said. “Shin, an expert on corporate equity structure and financial law, will preemptively review and respond to the legal risks associated with Kakao’s new business expansion.”

Kakao is also expected to propose the agenda of adding “label and music video production” as a new business to its articles of incorporation at the shareholders meeting.

Kakao, led by Kakao Entertainment Corp., has been enhancing business in North America, with focus on music and stories such as webtoons and web novels.

Kakao Entertainment launched Tapas Entertainment Inc. in August last year through a merger of its webtoon and web story subsidiaries in North America. The company plans to use Tapas Entertainment as a foothold and expand presence in the local webtoon and content market. It also plans to take advantage of SM Entertainment’s capabilities.

“Kakao will seek ways to expand its business to characters and commerce to go beyond content production and distribution based on the intellectual property of SM Entertainment based on its global platform,” said an unnamed official from the IT industry.

Kakao also introduced a change to the management of Tapas Entertainment. It will be led by a single chief executive officer, Park Jong-chul, and it has seated Kang Jeong-gu, former head of Kakao Entertainment’s global business, as chief content officer.

Kakao, in the meantime, will also carry out efforts to save costs to improve profit.

Kakao will propose the agenda of reducing the upper limit of director compensation to 8 billion won from 12 billion won last year. Kakao saw its operating profit decline 2.4 percent in 2022 from a year ago, marking the first fall in five years.