Kakao to acquire 2 entertainment agencies

Seen is the web page of BH Entertainment, one of the two large entertainment management agencies that Kakao is seeking to acquire.

By Jun Ji-hye

Kakao M plans to acquire two large entertainment management agencies of many big stars in a bid to expand its business beyond information technology to media content, the company said Wednesday.

The takeover targets are BH Entertainment, which manages actor Lee Byung-hun and actresses Han Ga-in and Han Ji-min; and Soop Entertainment whose roster includes actor Gong Yoo and actresses Jeon Do-yeon and Gong Hyo-jin.

“We are considering the takeover of the entertainment management companies to raise our competitive power,” an official from Kakao M said. “We are currently in talks with them, though nothing has been decided yet.”

Kakao, the operator of the nation's largest messaging app Kakao Talk, plans to merge with Kakao M, the firm's entertainment affiliate operating the music-streaming service Melon, in September if a meeting of general shareholders approves the plan, July 5.

When the merger was announced in May, Joh Su-yong, co-CEO of Kakao, said the decision was aimed at strengthening its entertainment content based on Melon's 4.65 million users. He also unveiled a plan to start a separate corporation comprehensively dealing with content.

Kakao said a separate corporation, expected to be started in September, will be a core part specializing in intellectual property (IP) and content in the global market.

His co-CEO, Yeo Min-soo, said at the time that the upcoming corporation for content “will make big achievements in the global market in the areas of music and videos.”

The acquisition costs have yet to be revealed, but market observers estimate them at tens of billions of won, considering the market value of actors and actresses contracted with the two agencies.

Once the acquisition is completed, Kakao is expected to begin the production of its own media content, which will expand its influence in the industry significantly.

Formerly LOEN Entertainment, Kakao M became a Kakao subsidiary in a 1.8 trillion won ($1.6 billion) deal in March 2016. Through this acquisition, Kakao took over several entertainment management agencies representing singers IU and Huh Gak, and girl group Apink.

Lee Dong-ryun, an analyst from KB Securities, said the Kakao merger with Kakao M will enable it to push for large-scale M&A deals as it will be able to use the cash of Kakao M as a financial resource.

Kakao M reportedly has some 300 billion won in cash assets.

Observers raised the likelihood for Kakao to push for additional acquisitions of entertainment companies other than BH Entertainment and Soop Entertainment.