Kakao Corp., South Korea’s largest mobile platform, is looking to sell a majority stake in Kakao Entertainment Corp., dropping a plan to take it public following the sharp downturn in stock markets, according to investment banking sources on Tuesday.
In a recent letter to Kakao Entertainment’s major financial investors, the mobile giant has notified them of the plan to unload its majority stake in the unit, said the sources, a move seen as aimed at exiting it at an appropriate valuation.
Its shareholders include Singapore’s GIC, Saudi Arabia’s Public Investment Fund (PIF), China’s Tencent and Anchor Equity Partners.
The move comes as Kakao Entertainment has been shedding unprofitable units to improve its financial health, fueling speculation that it might revive its IPO plans on hold since 2021. It had attempted to list on the Nasdaq, but to no avail.
Kakao Corp. holds a 66.03% stake, followed by Anchor Equity with a 12% stake. A special purpose company set up by Anchor Equity and GIC owns a 6.73% stake, while PIF and Tencent hold 5.1% and 4.5% stakes, respectively.
In 2023, its enterprise value was estimated at 11 trillion won ($7.4 billion), when it attracted $964 million in investments from GIC and PIF.
Followingr its purchase of SM Entertainment Co., a K-pop pioneer, in 2023, its enterprise value was estimated at as much as 20 trillion won. However, the deteriorating performance of some units it had acquired led to a swelling in debts.
Kakao Entertainment’s business spans three main areas: music labels, the digital content platform Kakao Webtoon and film production.
Since 2021, it has bulked up through M&As, with its subsidiary count increasing to 53 in 2022 from 14 in 2020.
In 2021, it acquired Tapas Media, a US digital comics platform, and the US fiction app Radish Fiction for around 1 trillion won in total. But the two companies are in the process of liquidation.
Investment bankers say its potential buyers include gaming companies such as NCSOFT Corp. and Krafton Inc. ; other entertainment powerhouses such as HYBE Co .; and private equity firms.
The sale may allow Anchor Equity, a decade-long investor in Kakao Entertainment, to exit its stake in the near future.
But PIF and GIC may not join other investors in selling their shares due to the decline in the company’s valuation, say industry observers.
In 2024, operating profit at Kakao Entertainment jumped 16.5% to 80.6 billion won from the year prior, despite a 3.2% dip to 1.81 trillion won in sales.
By Jong-Kwan Park, Jun-Ho Cha and Da-Eun Choi
pjk@hankyung.com
Yeonhee Kim edited this article.
