Value context and insight. lkm@koreatimes.co.kr
Kakao Pay, Siebert agree to terminate acquisition deal
Kakao founder Kim Beom-su / Yonhap
By Lee Kyung-min
Siebert Financial Corp. a New York Stock Exchange-listed investment consultancy, and Kakao Pay, the payment subsidiary of Kakao Corp., announced Wednesday that they agreed to terminate the previously announced stock purchase agreement.
Behind the decision was growing legal risks involving Kakao’s management. Kakao Chief Investment Officer Bae Jae-hyun was arrested in October on charges of manipulating stocks of SM Entertainment, a local entertainment management firm. Kakao founder Kim Beom-su and then CEO Hong Eun-taek were summoned for questioning thereafter. Bae and the corporate entity of Kakao were both indicted. The case of Kim and Hong were referred for prosecution.
Wednesday’s development puts an end to the months of collaboration, where Kakao Pay signed a contract to acquire 51 percent of Siebert's stake for about 139.9 billion ($106 million) won in April.
Of the total, 19.9 percent stake was acquired in May. The acquisition of the remaining stakes was scheduled for next year.
In November, Siebert expressed that the second part of the transaction will be made difficult due to legal risks associated with Kakao management.
The New York-based financial entity also submitted an opinion with the U.S. Securities and Exchange Commission (SEC) that the Korean authorities are “taking action” against Kakao Pay and its parent company, Kakao.
Among risks threatening sound corporate management is Kakao having to give up status as the largest shareholder of Kakao Bank, its bank subsidiary. If convicted, Kakao will have to sell off shares to pull down its stake to 10 percent from the current 27.17 percent.
The termination frustrates Kakako’s vision of Beyond Korea whereby its overseas business will surpass 30 percent of the firm revenue by 2025, up from the current 20 percent.
Whether Kakao Mobility, Kakao’s mobility services subsidiary, will experience similar a disruption remains to be seen.
Kakao Mobility is seeking to acquire FreeNow, the largest ride-hailing and taxi services platform in Europe.
Kakao Mobility has conducted due diligence into FreeNow over the past two months. It submitted a preliminary bid to acquire an about 80 percent stake before the year’s end.
Kakao’s third-quarter sales came to 2.1 trillion won, up 16.3 percent from a year earlier. It was the highest quarterly sales figure. Operating profit stood at 140.3 billion won, down 6.7 percent from a year prior. It exceeded the market consensus of 129.2 billion won.