Pressure mounts on Naver to shed stake in Line

Takeshi Idezawa, CEO of the Tokyo-based LY Corp., the operator of the messaging app Line, said Wednesday that the company has requested its key shareholder Naver to sell stakes in an apparent move to cut the Korean firm’s control over its management.

The decision comes as Naver is under growing pressure from the Japanese government to shed its ownership in Line, the popular app the Korean firm has nurtured over the past 13 years. Currently, almost 70 percent of the Japanese population is known to be using the mobile messenger.

“Japan's Ministry of Internal Affairs and Communications’ administrative guidance is a reexamination of the capital controlling relationship with the entrusted company (Naver),” the LY Corp. CEO said in a press briefing held in Japan later in the day.

He declined to further elaborate, saying that “Naver and SoftBank are in discussions on the matter.” LY Corp. is majority-owned by A Holdings, a 50-50 joint venture between Naver and SoftBank.

A data breach incident in November is cited as one of the key reasons behind the Japanese government’s rare intervention in the corporate issue. But industry watchers say Japan may be attempting to seize the management rights of Line from the Korean firm.

Adding to the possible stake sale, LY Corp. also announced that Shin Jung-ho, the company’s chief product officer, who is often called the “Father of Line” for his major role in developing the popular app, will step down as the only Korean member of the company’s board.

The new board, consisting of all Japanese members, will be approved at a shareholders’ meeting set to be held in June.

Regarding Shin’s departure, the CEO said the decision was to improve and strengthen the company’s security governance while establishing a more independent management system by increasing the number of outside directors.

Idezawa noted reporters do not take it as a “dismissal” since he will keep his CPO position.

“The discussion on increasing the number of outside directors in terms of strengthening security governance is something we have been talking about with major shareholders for a long time, and in that context, Shin will step down from the board of directors,” the CEO said.

In the meantime, Korea’s science minister earlier in the day pledged to protect domestic companies from “unfair treatment” in overseas markets, citing the Naver-Line dispute.

“We have been continuously and closely cooperating with Naver to guarantee the maximum rights of Naver’s decision-making,” said Lee Jong-ho, minister of science and ICT, in a meeting with reporters.

“The ministry plans to counter (this issue) by putting the foremost value in ensuring that (Korean) companies’ foreign businesses and investments do not receive unfair treatment.”