High sale price impedes Nexon M&A

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High sale price impedes Nexon M&A

By Jun Ji-hye

A battle to take over control of Nexon is making slow progress due to the high acquisition price estimated at more than 10 trillion won ($8.4 billion), industry analysts said Wednesday.

The preliminary bid for the takeover was wrapped up in February, but final bidding, initially scheduled for April, has yet to take place, being postponed twice ― first to Wednesday and now to the end of the month.

Headquarters of Nexon in Pangyo, Gyeonggi Province / Courtesy of Nexon
Candidates for the acquisition include the nation's largest mobile messenger operator Kakao, the nation's largest private equity fund MBK Partners, leading game firm Netmarble and Chinese tech giant Tencent.

Analysts said various factors seem to have affected the mega deal, and among them, the high acquisition price was thought to be the biggest.

"The acquisition price, estimated at 10 trillion won, is a huge amount of money even for Tencent," said Seong Jong-hwa, an analyst from eBEST Investment Securities. "Investors will continue working secretly to devise various methods for the takeover."

Sources said the final bidding was postponed upon the request of some candidates.

They said potential purchasers apparently want to prolong the acquisition process to drive down the price, while Nexon founder Kim Jung-ju, current CEO of Nexon's holding company NXC, is pushing to sell his company at as high a price as possible.

Kim previously put NXC's 98.64 percent stake owned by him, his wife and his private company on the market. NXC has ownership in Nexon that is headquartered in Japan, and the Japanese entity controls Nexon Korea.

Kakao and Netmarble reportedly each hold about 2 trillion won in cash.

Sources said Netmarble, which has been most active in seeking to acquire Nexon, will have no choice but to form a consortium with MBK Partners, which has ample cash reserves.

In an apparent move to raise capital, Netmarble has also changed part of its articles of association during a general meeting of stockholders in March, making it easier to attract overseas funding.

Nexon founder Kim Jung-ju
At the time, Netmarble CEO Kwon Young-sig told reporters, "Our investment last year into Big Hit Entertainment was successful. We will continue to make investments this year and next year if we find good opportunities."

Big Hit Entertainment is an agency behind K-pop idol group BTS.

From Netmarble's point of view, the takeover of Nexon is expected to create synergy as it will provide various Nexon patents.

Netmarble has mostly relied on outside patents, which has forced the firm to spend a considerable amount on royalties.

"If Netmarble succeeds in taking over Nexon, it will be able to expect a considerable synergy effect based on Nexon's patents," said Jeong Ho-yoon, an analyst at Korea Investment & Securities.

Meanwhile, a Nexon official said, "There is nothing we can confirm now regarding the sale of the company."


By Jun Ji-hye

A battle to take over control of Nexon is making slow progress due to the high acquisition price estimated at more than 10 trillion won ($8.4 billion), industry analysts said Wednesday.

The preliminary bid for the takeover was wrapped up in February, but final bidding, initially scheduled for April, has yet to take place, being postponed twice ― first to Wednesday and now to the end of the month.

Headquarters of Nexon in Pangyo, Gyeonggi Province / Courtesy of Nexon
Candidates for the acquisition include the nation's largest mobile messenger operator Kakao, the nation's largest private equity fund MBK Partners, leading game firm Netmarble and Chinese tech giant Tencent.

Analysts said various factors seem to have affected the mega deal, and among them, the high acquisition price was thought to be the biggest.

"The acquisition price, estimated at 10 trillion won, is a huge amount of money even for Tencent," said Seong Jong-hwa, an analyst from eBEST Investment Securities. "Investors will continue working secretly to devise various methods for the takeover."

Sources said the final bidding was postponed upon the request of some candidates.

They said potential purchasers apparently want to prolong the acquisition process to drive down the price, while Nexon founder Kim Jung-ju, current CEO of Nexon's holding company NXC, is pushing to sell his company at as high a price as possible.

Kim previously put NXC's 98.64 percent stake owned by him, his wife and his private company on the market. NXC has ownership in Nexon that is headquartered in Japan, and the Japanese entity controls Nexon Korea.

Kakao and Netmarble reportedly each hold about 2 trillion won in cash.

Sources said Netmarble, which has been most active in seeking to acquire Nexon, will have no choice but to form a consortium with MBK Partners, which has ample cash reserves.

In an apparent move to raise capital, Netmarble has also changed part of its articles of association during a general meeting of stockholders in March, making it easier to attract overseas funding.

Nexon founder Kim Jung-ju
At the time, Netmarble CEO Kwon Young-sig told reporters, "Our investment last year into Big Hit Entertainment was successful. We will continue to make investments this year and next year if we find good opportunities."

Big Hit Entertainment is an agency behind K-pop idol group BTS.

From Netmarble's point of view, the takeover of Nexon is expected to create synergy as it will provide various Nexon patents.

Netmarble has mostly relied on outside patents, which has forced the firm to spend a considerable amount on royalties.

"If Netmarble succeeds in taking over Nexon, it will be able to expect a considerable synergy effect based on Nexon's patents," said Jeong Ho-yoon, an analyst at Korea Investment & Securities.

Meanwhile, a Nexon official said, "There is nothing we can confirm now regarding the sale of the company."


Jun Ji-hye jjh@koreatimes.co.kr


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