MBK Partners Completely Exits Stake Acquisition in Kakao Mobility

[Asia Economy Reporter Park So-yeon] MBK Partners has halted its work related to acquiring shares in Kakao Mobility.

According to the investment banking (IB) industry on the 22nd, MBK Partners recently stopped all work related to acquiring shares in Kakao Mobility, including the acquisition of financial investor (FI) stakes. A senior MBK official hinted, "Kakao Mobility is off the table."

MBK had shown a strong willingness to acquire and had been pushing negotiations forward. The share acquisition process of Kakao Mobility, initiated based on Kakao's proposal, had progressed significantly, reaching the preliminary due diligence stage. It is reported that they had secured the National Pension Service as an investor and found financial institutions to provide acquisition financing.

Even after Kakao announced the withdrawal of the sale due to internal and external opposition, the IB industry largely believed that the dialogue between MBK and the other financial investors (FIs) remained open. However, it appears that MBK internally judged that holding shares without management rights had low investment value. With MBK completely withdrawing from the Kakao Mobility share acquisition battle, there is speculation that the exit of existing Kakao Mobility shareholders could become a long-term process.

Kakao Mobility is a mobility-specialized subsidiary spun off to expand mobility businesses such as taxi-hailing, designated driver services, and parking, starting with the launch of Kakao Taxi in 2015. It grew rapidly after a physical split in 2017. Recently, during the partial sale of existing investor shares, it was valued at 8.5 trillion KRW. The largest shareholder of Kakao Mobility is Kakao, holding 57.5% of the shares.

Kakao considered becoming the second-largest shareholder by transferring to MBK a majority stake composed of about 15% of its 57.5% stake combined with 35.2% owned by the TPG consortium and Carlyle Group. Kakao Mobility was a core subsidiary of Kakao preparing for an IPO since last year, but it became a headache for the group amid controversies such as infringement on local businesses. Last year, Kakao founder Kim Beom-su was repeatedly summoned as a witness at the National Assembly audit due to fare increases.

Against this backdrop, MBK negotiated to become the single largest shareholder by simultaneously purchasing shares from financial investors like TPG and Carlyle, as well as some shares from Kakao. However, when this was reported in the media in June, there was significant internal backlash. Kakao explained that it was not selling all its shares but only about 10% to become the second-largest shareholder, but opposition to the sale came from Kakao Mobility employees and even the Kakao labor union.

Ryu Geung-seon, CEO of Kakao Mobility, requested a suspension of the sale to Kakao in July, and in August, a 'Council for Sustainable Growth of Mobility and Society' involving employee representatives and management prepared 'Measures for Sustainable Growth of Mobility and Society' and submitted it to the Kakao Community Alignment Center (CAC).

Following Kakao's official withdrawal of the share sale and MBK's complete exit from the acquisition battle, Kakao's financial burden has increased. It is known that Kakao guaranteed the return of investment funds through an IPO or sale during the process of attracting investment from foreign FIs. Since share sales have become difficult for the time being, it is highly likely that Kakao will turn to pursuing an IPO. However, it remains uncertain whether an appropriate corporate valuation satisfactory to investors can be achieved during this process.