Naver to create global internet platform with SoftBank

By Jun Ji-hye

Naver's Japanese subsidiary Line is set to merge with Yahoo Japan, seeking to become a global internet group that can match China's e-commerce giant Alibaba or the U.S.-based retail giant Amazon, company officials and analysts said Thursday.

Line, a popular messaging app in Japan, has more than 80 million users. Yahoo Japan is Japan's largest internet portal operator with more than 50 million users.

Lee Hae-jin, Naver's founder and global investment officer

When the deal is completed, the Japanese-Korean mega-platform ― with more than 100 million users ― will span the messenger, search, finance and retail sectors among other services.

“We are considering the merger (with Yahoo Japan) as part of efforts to enrich enterprise value,” a Line official said.

She noted, however, that “nothing has been decided yet.”

Naver owns 73 percent of Line while SoftBank Group has a 45 percent stake in Z Holdings, a parent company of Yahoo Japan.

According to the Nikkei Asian Review, Naver and SoftBank are considering setting up a new 50-50 joint venture that would become the largest shareholder of Z Holdings. Then, Z Holdings would wholly own Line and Yahoo Japan.

The two sides are aiming to reach a basic agreement by the end of the month, Japanese media said.

Analysts said the merger is expected to create significant synergy in the digital payments sector.

Yahoo Japan has expanded its business, jointly operating a smartphone payments service, PayPay, with SoftBank.

SoftBank CEO Masayoshi Son

Line has also moved aggressively to expand its digital payments services and make heavy investments in tandem with Japan's policy to move toward a cashless society. Based on the huge influence of its mobile messenger service in Japan, Line launched its mobile payments service Line Pay in 2014.

“As we saw in Naver's case in Korea, the search advertisement market is consistently growing while synergies between search, mobile payment and shopping services are significantly increasing,” NH Investment & Securities analyst Ahn Jae-min said.

“Once the messaging app and the internet portal are combined, the two sides will be able to secure strong competitiveness that encompasses internet, e-commerce, fintech and content industries.”

Ahn said the merger would also enable Naver to increase the value of its subsidiary and enhance its influence in the global market by dominating the “meaningful market” in Japan.