Cyworld-Emphas Merger Alerts Naver
By Cho Jin-seo
Staff Reporter
SK Communications, the operator of popular Cyworld blog service and Nate portal, said Monday that it will merge with Empas search engine in a reverse takeover.
The amalgamation of the two entities will form a formidable Internet power that can challenge the strong leadership of NHN's Naver portal. The action will also ease SK Group's burden of meeting government regulations on corporate governance of conglomerates.
SK Communications's Cyworld is Korea's largest Web blog and community service with 20 million members. The firm had 185 billion won in sales last year, with 100 billion won from music sales from bloggers. It is not listed on the stock market while Empas has been traded in the junior Kosdaq market.
Empas is one of the pioneers in the Internet search and portal field. But it has been losing ground over the past few years against Naver, Daum and Nate. SK Communications said the converging of Nate, Cyworld and Empas will create a synergy and reduce their operating cost by restructuring redundant business sectors.
``We have decided on the merger in order to cope with the rapidly changing Internet searching market. We will lead the next-generation trend by providing new values and services based on innovative platforms,'' Yoo Hyun-oh, CEO of SK Communications, said in a press release.
The firm said Yoo will take charge of the merged company. The role of Park Seok-bong, CEO of Empas, will be decided at the firm's first general shareholders meeting set for Sept. 6, a media relations official of SK Communications said.
Shares of SK Communications and Empas will be evaluated by 1 to 3.3197 in the process of the backdoor listing. Empas has the market value of 200 billion won as of last Friday's closing price.
The merger has been well expected in the market since SK Communications acquired 24.4 percent of Empas shares last year because of the government's regulations on pyramid corporate governance. SK Communications is a subsidiary of SK Telecom, which is in turn a child company of SK Corp. The law allows only three levels within a conglomerate's pyramid structure, leaving the Empas' presence in the SK Group's shareholding hierarchy illegal. To meet the standard, SK Communications had to either sell the Empas shares or to acquire its remaining shares.
Empas was a respected figure in the Internet industry with its powerful Korean-language searching engine. ``If Yahoo can't find it, Empas can,'' was its famous motto along with its mascot the Empas Rabbit.
But its influence has rapidly waned in recent years while newcomers such as Naver and Daum expanded their shares of the pie. According to Ranky.com, Empas has only a 4-percent share in the domestic portal market, against 40 percent of Naver, 24 percent of Nate and 20 percent of Daum.
SK's Cyworld also had struggled in finding a new business item since its ambitious Cyworld 2 service has failed to appeal to its users so far.
The two firms first forged a partnership alliance last October in the searching business. In March, Nate began to use Empas' searching engine on its front page.