Lee Gyu-lee is a business writer at The Korea Times, focusing primarily on IT & telecommunications, the Ministry of Trade, Industry and Energy and KOTRA. Prior to this, she has covered a wide range of cultural news, from film, television and K-pop to lifestyle and fashion.
Kakao's struggle deepens over unit selloff rumors
A photo of Kakao's Pangyo office in Gyeonggi Province / Courtesy of Kakao
By Lee Gyu-lee
Kakao’s efforts to streamline its sprawling business portfolio are facing headwinds, as a mix of rumors and facts surrounding the platform giant’s possible divestment of affiliates is sending negative signals to the market.
According to industry officials on Friday, Kakao Entertainment co-CEOs Kweon Ki-su and Joseph Chang recently told the company’s employees that reports alleging Kakao is planning to sell the entertainment unit are “misrepresented.”
“Kakao was in discussions over changes in Kakao Entertainment’s shareholding structure of its financial investors, and we believe that details from the process were misrepresented,” the CEOs said.
Earlier this week, local news outlets reported that Kakao sent letters to major shareholders of Kakao Entertainment, including Anchor Equity Partners, a Hong Kong-based private equity firm, and Chinese company Tencent, expressing its intention to sell its stake in the subsidiary.
Members of Kakao's labor union stage a protest against the company's alleged sale of web portal Daum during a rally in front of the company's office in Seongnam, Gyeonggi Province, March 19. Yonhap
Kakao, which holds a 66 percent stake in Kakao Entertainment, has been seeking to list the entertainment unit since 2019 but faced skepticism that the initial public offering would undermine the parent company’s value.
Kakao Entertainment’s earnings tumbled due to the poor performance of its web novel and music label subsidiaries, posting a 259.1 billion won net loss last year.
Kakao said in a regulatory filing that “nothing has been finalized” and it is “reviewing various options with shareholders of Kakao Entertainment to enhance the overall corporate value of the Kakao Group,” but a growing number of Kakao Entertainment employees are reportedly seeking to join Kakao Group’s labor union.
Also mired in rumors is Kakao Mobility, which operates the Kakao T ride-hailing platform, as reports alleged that private equity VIG Partners is seeking to take over stakes of major financial investors amounting to 40 percent. Attention is on whether Kakao, the biggest shareholder with 57.2 percent, will sell some of its shares and transfer the company’s managing rights.
Along with the mobility firm, Kakao is struggling with suspicions that it may exit from the web portal Daum. Kakao CEO Chung Shin-a said on March 26 that the company is not considering selling Daum, but its union is raised suspicions that the company will sell off those units.
"It is clear that public interest will be compromised if platform services containing sensitive user information are operated by private equity funds, so policy measures to control stake sales to them must be urgently established,” the union said.
As controversy mounted, Kakao reiterated its stance about the affiliates’ potential sales.
“(The company’s) stance remains as disclosed in the regulatory filing. All matters related to divesting have not been confirmed,” a Kakao official said.