Lezhin Entertainment, which operates South Korea’s online web cartoon platform Lezhin Comics, is expected to be sold to Kidari Studio, the media contents arm of DaouKiwoom Group, in a deal valuing Lezhin at about 250 billion won ($224 million).
Shareholders of Kidari Studio and Lezhin Entertainment have signed a memorandum of understanding for the deal, industry sources said on Tuesday (November 10). A contract is expected to be signed once Kidari Studio completes a detailed due diligence on the company and negotiations have been completed.
IMM Private Equity, which acquired a minority stake in Lezhin Entertainment in 2016, has been seeking exit opportunities for years. It has been struggling to retrieve its investments, with Lezhin Entertainment making continuous losses until last year.
However, the situation has changed, as Lezhin Entertainment founder and largest shareholder Han Hee-sung and Kidari Studio have started to share views on webtoon platform markets and this has reportedly led to the signing of the MOU.
Han has a 38.8% stake in Lezhin Entertainment, and Kwon Jeong-hyuk, former chief technology officer, has 22.5%. IMM PE’s special purpose company Jindo has a 16.3% shareholding and NCSoft owns 9.6%.
Lezhin Entertainment partnered with Kidari Studio in June to provide webtoon content to customers in the United States and France through their overseas subsidiaries. Kidari Studio expanded its webtoon production and distribution business by acquiring webtoon platform Bom Comics in 2017 and France-based Delitoon last year.
IMM PE invested a combined 50 billion won ($45 million) to acquire Lezhin Entertainment’s new shares and some of the common shares held by NCSoft through its blind-pool fund RoseGold 3 in July 2016.
Lezhin Entertainment’s revenue decreased by about 11.5% to 34.5 billion won last year, from 39 billion won in 2016. It posted an operating loss of 5.2 billion won in 2019, down from an operating income of 700 million won in 2016.
IMM PE had planned to hold an initial public offering within three years after its investment, but couldn’t do so due to the company’s poor performance. The PE firm is likely to retrieve the amount it invested through the latest deal.
Shareholders of Lezhin Entertainment and Kidari Studio have valued the company at approximately 250 billion won and reportedly entered into negotiations. Given that Lezhin Entertainment was in a net cash position of 8 billion won at the end of 2019, IMM PE is expected to retrieve approximately 50 billion won, the amount it invested in the company, based on its shareholding of 16.3%. (Reporting by Ar-rum Rho)