Shareholders give nod to Daum-Kakao merger

Shareholders of Daum Communications Corp. and Kakao Corp. on Wednesday approved the merger of the two firms that will create the biggest company on South Korea's secondary bourse.

"As the merger deal passed the last step, (Daum and Kakao) will finalize the related procedures and officially launch the new entity on Oct. 1," the two firms said in a press release.

"With this, we have begun our full-fledged efforts to emerge as a global communication-information-life platform provider," they said.

The nod of approval came three months after the two announced a merger through a stock swap arrangement. The stock swap ratio has been set at one Daum share for 1.556 shares of Kakao. Daum will exchange its newly issued stocks for those of Kakao.

The new company will easily become the biggest firm on the tech-heavy KOSDAQ in terms of market capitalization, surpassing Celltrion Inc., whose market cap reached 4.32 trillion won ($4.26 billion) Wednesday.

With that of Daum already hovering around 2.2 trillion won, market watchers said the merged entity may well jump to over 10 trillion won, considering the value of South Korea's top messenger service provider, Kakao, is estimated at around 9 trillion won.

The union is in effect a reverse merger for Kakao, which initially planned to go public in 2015. The merger gives it a back-door listing.

Industry watchers say Daum-Kakao may also seek listing on the main bourse after fulfilling the required three years on KOSDAQ.

Kakao Talk, Kakao's flagship service, commands 37 million users here among the country's population of 50 million.

As of this month, the messenger service has around 152 million users worldwide through 15 languages, including Korean, English, Japanese, Spanish, German, Arabic and Russian.

Daum, the portal operator, accounted for 19.89 percent of the local market search-engine market in July, according to data compiled by market tracker Nielsen KoreanClick Co., far below No.1-ranked Naver Corp.'s 76.69 percent.

Analysts have been painting a rosy picture for Daum-Kakao.

Tongyang Securities Inc. revised up its target price of Daum to 200,000 won, citing Kakao's growing revenue sources.

Daum closed at 153,600 won on the secondary bourse Wednesday, down 5.88 percent from the previous trading session, when the KOSDAQ shed 1.01 percent.

Kakao has been diversifying its business portfolio to make up weakening profit from conventional sources, launching Bank Wallet Kakao, a mobile platform that supports small-sum financial transactions and mobile payments. (Yonhap)