[Exclusive] Kakao Entertainment IPO Trend Shift... Webtoon Affiliate Kakao Piccoma Considering Merger

Each Plans IPO Separately but Decides to Support Kakao Entertainment
Resolving Concerns Over Overextended Listings, Expecting Valuation Increase

[Asia Economy Reporter Kwangho Lee] Kakao Entertainment is considering a plan to absorb and merge the webtoon platform 'Piccoma,' a Kakao affiliate. Attention is focused on how the merger will affect Kakao Entertainment's initial public offering (IPO) process if it is successful.

According to the investment banking (IB) industry on the 15th, Kakao Entertainment is reviewing a plan to absorb and merge Kakao Piccoma, the operator of the Japanese webtoon application Piccoma. Initially, Kakao Entertainment and Kakao Piccoma were each planning to pursue their own IPOs. However, they have shifted direction to support Kakao Entertainment.

An IB industry official said, "Kakao Entertainment has been steadily considering merging with Kakao Piccoma," adding, "Although the merger ratio has not yet been discussed, the possibility of a merger is very high." He continued, "If Kakao Entertainment makes Kakao Piccoma a business division, the valuation will increase," and predicted, "They will build up their listing capacity and push for a listing within the year."

Kakao Piccoma is a global comics and novel platform. It competes with Naver's Line Manga in the Japanese manga app market. Currently, it is classified as a subsidiary of Kakao. Kakao and Kakao Entertainment hold 72.9% and 18.2% of the shares, respectively.

The transaction will be conducted by Kakao selling its shares of Kakao Piccoma to Kakao Entertainment. Currently, Kakao Piccoma's valuation reaches several trillion won. Since the transaction occurs within Kakao, the valuation is expected to be recognized as much as possible.

Kakao Piccoma is considered a valuable affiliate. Despite uncertain global economic conditions, it maintains a high global market share. It holds over 50% market share in the Japanese app manga market. It has also ranked first in total sales across both Google Play and Apple App Store markets, including games.

In the case of Piccoma Europe, which has expanded into France, user metrics are steadily increasing based on story intellectual property (IP) verified in Korea and Japan. Kakao Piccoma supplies Kakao Entertainment's Kakao Webtoon works to Japan and France. Among these, "Solo Leveling" is a representative Kakao Webtoon work with over 14 billion cumulative global views. Marketing continues focusing on verified works.

Kakao had planned to list the profitable Kakao Piccoma in the Japanese market. Last year, Kakao Piccoma's target valuation was around $6 billion (approximately 8 trillion won). They hoped to maintain the valuation recognized during the previous investment round. However, due to worsening market conditions, the listing plan was postponed to this year. Subsequently, the merger option with Kakao Entertainment emerged.

Kakao Entertainment recently signed an investment attraction contract worth 1.154 trillion won with the Saudi Arabian sovereign wealth fund and the Singapore Investment Corporation. The industry expected this to accelerate Kakao Entertainment's IPO process. However, it was reported that the contract was made at about half the previous valuation. This situation is unsatisfactory for existing financial investors (FIs).

In this context, if Kakao Entertainment merges with Kakao Piccoma, the valuation will naturally rise. This is welcomed by FIs who are eager to exit their investments.

Another IB industry official said, "The news of overseas investment attraction itself was positive," but added, "However, it was shocking to the industry that the investment was received not by raising the valuation but rather by lowering it." He further stated, "Due to the impact of the valuation decline, the possibility of merging with Kakao Piccoma has increased accordingly."