Kakao Page and Kakao M, two subsidiaries of mobile tech conglomerate Kakao, have said that they will be merging into a new entity, to be called Kakao Entertainment.
Industry sources said private equity (PE) firm Anchor Equity Partners, the second-largest shareholder of the two companies, had played a major role in striking the deal.
Each company will hold a general shareholders’ meeting to get final approval for the plan, with the merger expected to be completed on March 1. The merger ratio will be 1:1.31, which means that 1.31 common shares of Kakao Page will be allocated for one common share of Kakao M.
The merger process would have been nearly impossible without other shareholders’ approval. Kakao has a 63.5% stake in Kakao Page and a 77.3% stake in Kakao M, and a merger of two enterprises requires a vote of at least two-thirds (66.6%) of voting rights of attending shareholders and at least one-third of the total issued stock.
Anchor Equity Partners is the most notable shareholder in the deal, with a 20.6% stake in Kakao Page and a 12.9% stake in Kakao M. Ahn Sang-gyun, a managing partner at the firm, sits on the board of directors of Kakao Page and Kakao M. Market insiders said the merger plan wouldn’t have been carried out without Ahn’s support.
Anchor Equity Partners invested 125 billion won ($113 million) in Kakao Page, formerly Podotree, in December 2016 in a deal which valued the company at about 500 billion won. Kakao Page was valued at 1.25 trillion won for its initial public offering process in June 2019, and its worth is now likely to reach 4 trillion won.
Meanwhile, Anchor Equity Partners invested 209.8 billion won in Kakao M in March 2020 in what was seen as an extension of its Kakao Page deal. Kakao Page, which has intellectual property rights related to online cartoons and novels and also a platform to distribute content, is considered to be a core element of the content value chain within Kakao, while Kakao M focuses on producing original content. Kakao M is also continuing efforts to acquire local entertainment companies with pop artists.
Anchor Equity Partners will remain the second-largest shareholder after the merger, with a 17.6% stake. Kakao is expected to own a 68% stake in the new entity. (Reporting by Choong-hee Won)