Kakao joins takeover battle of Nexon

By Baek Byung-yeul

Kakao has joined the race to acquire control of Nexon, one of the nation's major game firms, the company said Wednesday.

“The bid to acquire Nexon is under thorough review,” said an official from Kakao, the nation's largest mobile messenger operator. “We have named the law firm Shin & Kim as our legal adviser.”

Nexon founder Kim Jung-ju recently put his entire stake in NXC, the holding company of Nexon, up for sale. Kim, his wife and his private company Wisekids own a 98.64 percent stake in NXC that owns 47.98 percent of Nexon.

Private equity firms and entertainment firms are said to be interested in the megadeal, which is estimated to be worth 13 trillion won ($11.6 billion).

With Kakao joining the bid, potential bidders for Nexon now reportedly include private equity firms TPG Capital, Kohlberg Kravis Roberts, Carlyle, MBK Partners and China's Tencent Holdings.

Given that Kakao has cashable assets of only about 1 trillion won ($895 million), the firm is expected to take out a corporate loan or form a consortium with strategic investors, according to sources from the investment banking field.

When Kakao took over a controlling stake in LOEN Entertainment, an online music streaming operator, for 1.87 trillion won in 2016, it borrowed 800 billion won in short-term loans from Samsung Securities and Korea Investment Securities to fund the deal.

Market observers have seen Tencent as the most likely candidate for the Nexon acquisition, as the world's largest game publisher holds funds of up to $100 billion.

While preliminary bidding is expected to begin in mid-February, it remains to be seen how Kakao would navigate its relationship with Tencent, which is the second-largest shareholder of Kakao at 6.7 percent.

Founded in 1994, Kim has been regarded as a pioneering figure in the country's game industry, growing Nexon into one of the top game firms here with many hit games such as “Crazy Arcade,” “Dungeon Fighter Online” and “Maple Story.”

Not only Nexon but also the entire game industry has suffered a downturn over the past year due to a delay in releasing new games and difficulty in exporting their products to the Chinese market in addition to some politicians moving to strengthen regulations.

With regard to the reason for him selling his company, Kim said in a statement, “I won't dwell on the present. I am considering many different options to make Nexon a competitive, global company.”