Korea's game pioneer decides to cash out amid increasingly unfavorable outlook
By Jun Ji-hye
Nexon founder Kim Jung-ju has decided to sell the nation's leading game company, sending shockwaves through the game industry, according to industry sources, Thursday.
Kim, current CEO of Nexon's holding company NXC, made the decision in an apparent judgment that the game industry is facing a tough future amid toughening regulations and fiercer competition, sources noted.
He also suffered exhaustion while undergoing two years of prosecution investigation on suspicious stock transactions and bribery allegations, they said.
According to sources in the investment bank field, Kim has put NXC's entire stakes owned by him, his wife and his private company on the market.
The stakes owned by the three totals 98.64 percent, with him holding 67.49 percent, his wife, who is an auditor of NXC, holding 29.43 percent and his private company Wisekids possessing 1.72 percent.
Kim reportedly hired Deutsche Securities and Morgan Stanley to supervise the sale of his company.
Market analysts estimate the acquisition price at more than 10 trillion won ($8.9 billion), when considering the value of companies owned by NXC. This would be the largest-ever merger and acquisition (M&A) deal in the nation.
"Kim has expressed his intention to people surrounding him that he may need to end the game business as he has become tired of regulations and the negative perception on games in addition to the prosecution investigation and trials he underwent," a source said.
Kim founded Nexon in Korea in 1994, but the firm is headquartered in Japan. The company's stocks were listed on the Tokyo stock exchange starting in late 2011.
Nexon's market capitalization based on the latest closing price values was about 13 trillion won. The Tokyo market is closed for a holiday until Thursday.
NXC has ownership in Nexon, and the Japanese entity controls Nexon Korea.
NXC also has stakes of several companies including Europe-based cryptocurrency exchange Bitstamp, Korean virtual currency exchange Korbit and children's furniture maker Stokke.
Kim has been regarded as one of the pioneers of the nation's game industry, growing Nexon into one of the top game firms with many popular games such as "Crazy Arcade," "Dungeon & Fighter" and "Maple Story."
Not only Nexon but also the entire game industry has suffered a downturn for 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.
Politicians are also calling on the government to designate games as part of the gambling industry in accordance with the World Health Organization's (WHO) push to classify game addiction as a disease in the same category as substance abuse and gambling addiction.
Kim also underwent a prosecution investigation for two years on suspicion that he gave 425 million won to Jin Kyung-joon, a prosecutor who is one of Kim's friends from high school, in 2005. Using this money, Kim allegedly bought 10,000 unlisted stocks in Nexon and raked in hefty stock gains of about 12 billion won after the company was listed in Japan, according to prosecutors at the time.
In May last year, Kim was found not guilty at the Seoul High Court.
Who will buy Nexon?
Market experts said it would not be easy to find an acquirer as the scale of the deal is too immense.
One of the candidates cited in the market is China's Tencent that distributes Nexon's "Dungeon & Fighter" in China.
Tencent already holds a 10 percent stake in Korean game firm Krafton, previously Bluehole.
Tencent's possible takeover of Nexon is raising concerns that the Korean game industry will lose its leadership further to Chinese competitors.
Other companies that market observers cited as candidates to acquire Nexon include Kakao, Netmarble and EA Games.
If the M&A deal is accomplished, Kim is expected to rest for the time being and plan new business.
Through holding firm NXC, he has recently bought various companies in diverse industries, including virtual currency exchanges, a golf wear brand and a children furniture maker.
Some observers raised possibility that Kim would exclude some subsidiaries from subject of sale for future business.
Meanwhile, stocks of Nexon's subsidiaries, Nexon GT and Netgames, are skyrocketing following the news of Kim's decision.
Stocks of Nexon GT rose 29.98 percent to 8,280 won from the previous day, while those of Netgames rose 29.99 percent to 9,580 won.
"It is still necessary to see the development of the situation as Nexon has yet to issue its official stance, but if the M&A deal is accomplished, subsidiaries will be able to expand its services in the Chinese market considerably," BNK Securities analyst Lee Kyung-il said. "With expectations toward the growth, stocks of Nexon subsidiaries are increasing rapidly."
By Jun Ji-hye
Nexon founder Kim Jung-ju has decided to sell the nation's leading game company, sending shockwaves through the game industry, according to industry sources, Thursday.
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| Nexon founder Kim Jung-ju |
He also suffered exhaustion while undergoing two years of prosecution investigation on suspicious stock transactions and bribery allegations, they said.
According to sources in the investment bank field, Kim has put NXC's entire stakes owned by him, his wife and his private company on the market.
The stakes owned by the three totals 98.64 percent, with him holding 67.49 percent, his wife, who is an auditor of NXC, holding 29.43 percent and his private company Wisekids possessing 1.72 percent.
Kim reportedly hired Deutsche Securities and Morgan Stanley to supervise the sale of his company.
Market analysts estimate the acquisition price at more than 10 trillion won ($8.9 billion), when considering the value of companies owned by NXC. This would be the largest-ever merger and acquisition (M&A) deal in the nation.
"Kim has expressed his intention to people surrounding him that he may need to end the game business as he has become tired of regulations and the negative perception on games in addition to the prosecution investigation and trials he underwent," a source said.
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Kim founded Nexon in Korea in 1994, but the firm is headquartered in Japan. The company's stocks were listed on the Tokyo stock exchange starting in late 2011.
Nexon's market capitalization based on the latest closing price values was about 13 trillion won. The Tokyo market is closed for a holiday until Thursday.
NXC has ownership in Nexon, and the Japanese entity controls Nexon Korea.
NXC also has stakes of several companies including Europe-based cryptocurrency exchange Bitstamp, Korean virtual currency exchange Korbit and children's furniture maker Stokke.
Kim has been regarded as one of the pioneers of the nation's game industry, growing Nexon into one of the top game firms with many popular games such as "Crazy Arcade," "Dungeon & Fighter" and "Maple Story."
Not only Nexon but also the entire game industry has suffered a downturn for 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.
Politicians are also calling on the government to designate games as part of the gambling industry in accordance with the World Health Organization's (WHO) push to classify game addiction as a disease in the same category as substance abuse and gambling addiction.
Kim also underwent a prosecution investigation for two years on suspicion that he gave 425 million won to Jin Kyung-joon, a prosecutor who is one of Kim's friends from high school, in 2005. Using this money, Kim allegedly bought 10,000 unlisted stocks in Nexon and raked in hefty stock gains of about 12 billion won after the company was listed in Japan, according to prosecutors at the time.
In May last year, Kim was found not guilty at the Seoul High Court.
Who will buy Nexon?
Market experts said it would not be easy to find an acquirer as the scale of the deal is too immense.
One of the candidates cited in the market is China's Tencent that distributes Nexon's "Dungeon & Fighter" in China.
Tencent already holds a 10 percent stake in Korean game firm Krafton, previously Bluehole.
Tencent's possible takeover of Nexon is raising concerns that the Korean game industry will lose its leadership further to Chinese competitors.
Other companies that market observers cited as candidates to acquire Nexon include Kakao, Netmarble and EA Games.
If the M&A deal is accomplished, Kim is expected to rest for the time being and plan new business.
Through holding firm NXC, he has recently bought various companies in diverse industries, including virtual currency exchanges, a golf wear brand and a children furniture maker.
Some observers raised possibility that Kim would exclude some subsidiaries from subject of sale for future business.
Meanwhile, stocks of Nexon's subsidiaries, Nexon GT and Netgames, are skyrocketing following the news of Kim's decision.
Stocks of Nexon GT rose 29.98 percent to 8,280 won from the previous day, while those of Netgames rose 29.99 percent to 9,580 won.
"It is still necessary to see the development of the situation as Nexon has yet to issue its official stance, but if the M&A deal is accomplished, subsidiaries will be able to expand its services in the Chinese market considerably," BNK Securities analyst Lee Kyung-il said. "With expectations toward the growth, stocks of Nexon subsidiaries are increasing rapidly."
