Nexon’s future in doubt as Kakao mulls bid for gaming company


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With South Korea’s top chat app operator, Kakao, admitting that it is reviewing a bid for the country’s major gaming company, Nexon, speculation is rampant concerning the prospects of Nexon and about what other global tech giants might show an interest in the bidding.

Kakao said the company was reviewing the possibility of taking part in the bid for NXC Corp., the holding company that controls Nexon. NXC Corp. founder Kim Jung-jo is widely reported to have decided to sell his 98.64 percent stake.

“There has been much internal discussion on the matter,” Kakao spokesperson Lee Yoon-kun told The Korea Herald.

The spokesperson, however, said the company had yet to reach a decision or choose a financial adviser for the bidding. Kakao also denied previous reports that the company had chosen Seoul-based law firm Shin & Kim.

(Kakao)

Given Kakao’s limited budget for an acquisition that is estimated to cost as much as 13 trillion won ($11.6 billion), speculation is also rampant over how the messenger operator would proceed with the bidding process.

One likely scenario involves Kakao joining hands with big-pocketed investors, analysts said. Kakao is estimated to have up to 1.2 trillion won or so in cash reserves.

“The money is much less than what would be needed to acquire Nexon,” said Lee Min-a, an analyst at KTB Investment & Securities.

“They would have to use private equity funds and other financial institutions as much as possible.”

The news of Kakao’s potential bid follows reports that the Chinese tech giant Tencent Holdings was considering bidding for Nexon. Other private equity funds and US game firms are also said to be interested.

Tencent is one of the world’s biggest gaming companies, with much bigger cash reserves than Kakao. The Chinese company is estimated to have 40 trillion won in revenue and 90 trillion won in assets. Tencent is a major publisher of games developed by Nexon, such as Dungeon Fighter Online.

But the possibility of a bid by Tencent has caused concern among many Koreans that the country’s leading gaming company might be sold to the Chinese firm. Some local newspapers have warned of an “outflow of national wealth.”

“Nexon being sold to the Chinese company is the last thing the Koreans want to see,” said an industry watcher. “Kakao must have taken such sentiment into account and found its maneuvering space there.”

Tencent is Kakao’s second-largest shareholder, with a 6.7 percent stake.

By Yeo Jun-suk (jasonyeo@heraldcorp.com)

Source : koreaherald


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