Japan's Line Yahoo to become largest shareholder of Kakao Games

Logos of Yahoo! Japan and Line / AP-Yonhap

LY Corp., the Japanese operator of Line and Yahoo! Japan, will become the largest shareholder of Kakao Games through an investment company, investing a total of 300 billion won ($200.4 million) in the game developer to revive its growth momentum.

Kakao Games said in its regulatory filings Wednesday that LAAA Investment, an investment company backed by LY Corp., will acquire an undisclosed amount of stake in the company and purchase 240 billion won of new rights and 60 billion won worth of convertible bonds.

When the transactions close in May, LAAA Investment will become the largest shareholder in Kakao Games, while its current largest shareholder Kakao will become the second-largest shareholder, the company said. Kakao currently holds a 40.7-percent stake in Kakao Games.

The transaction will inject 300 billion won into Kakao Games, which the company plans to use to strengthen its global competitiveness and accelerate efforts to build a mid- to long-term growth foundation. Kakao will also reinvest part of the proceeds from the share sale into the deal, maintaining its partnership with Kakao Games and supporting the company’s stable operations and long-term growth.

LY Corp. operates Japan’s leading web portal Yahoo! Japan and messaging app Line, which is widely used in Japan and Southeast Asia. With its global infrastructure, strong understanding of the gaming industry and solid financial capacity, the company is expected to help Kakao Games strengthen its mid- to long-term growth momentum.

After the investment, Kakao Games plans to focus on its game content business based on improved financial stability.

The company has posted operating losses for the past five quarters due to declining sales of its live service games, increasing development costs and the restructuring of non-core businesses.

Last year, Kakao Games unloaded its stakes in Sena Technologies, a communication tech firm for outdoor devices, and Kakao VX, a screen golf company, in order to concentrate its portfolio on gaming.

In February, the company rolled out SMiniz, a K-pop puzzle game, and plans to launch Odin Q and ArcheAge Chronicles later this year.

“The latest investment decision is an important turning point for Kakao Games to improve its global competitiveness and strengthen the foundation for sustainable growth,” a Kakao Games official said.

“Based on cooperation between partners including Kakao and LY Corp., we will expand our opportunities in the global market.”