Online messaging company Kakao and internet portal Daum Communications, both based in South Korea, completed a merger yesterday that values the new company at up to ₩10 trillion ($9.4bn).
The deal is structured as a reverse merger in which Kakao, which is backed by investors including internet companies Tencent and CyberAgent, will be taken over by publicly-listed Daum, despite the latter’s capitalisation being just over a quarter of Kakao’s.
The back-door listing is being implemented by Kakao as an alternative to a standalone initial public offering, which it had originally planned. It is the largest merger of IT companies in Korea’s history.
Tencent and CyberAgent have not disclosed how much they stand to gain from their exits, but venture capital firm DCM, which like CyberAgent, invested in Kakao’s series A round in 2011, told TechCrunch it is set to make a 20x to 30x return on its investment.
The newly formed company, which will operate under the name Daum Kakao, plans to compete directly with Naver, the market leader in Korea’s internet portal sector. Naver operates its own messaging service, Line, which filed for a $10bn IPO in July.
– Photo courtesy of Daum Kakao