Daum and Kakao to merge to form $3.3 billion IT giant

Korean search giant Daum, and mobile messenger company, Kakao, will conduct a share swap to create Daum Kakao, the second largest listed company on the nation's KOSDAQ exchange.

Korean search giant Daum Communications, and mobile messenger provider Kakao will merge in what is the largest move for local internet-based companies to date.

In a joint statement, the two firms said they have signed an agreement for a merger, and after an approval during a shareholders meeting on August, will inaugurate "Daum Kakao" in October. Daum will issue shares with a swap ratio of 1:1.556 to Kakao.

The new company is estimated to be worth 3.4 trillion won (US$3.3 billion) and become the second largest company to be listed on KOSDAQ.

"We've decided on the merger to maximize our competence in the fast-changing global market environment," the statement said.

They said that Kakao's "excellent" mobile platform and Daum's leadership in mobile advertisement will become the foundation for the much-needed impetus and synergy for growth in future mobile business.

Market watchers say the two companies complement each others' weaknesses and will likely pose a threat to Korea's largest internet and mobile services company, Naver.

Daum was founded in 1995 and one of the earliest formed internet-based companies in Korea. Though runner-up in search behind Naver, and a powerhouse in PC-based services and mobile advertisement, it was late to enter the quickly-expanding mobile market and lacks a platform in the sector.

Kakao, which created Korea's most popular messenger, Kakao Talk, was formed in 2006 and quickly rose to dominate the mobile platform, especially in games.

However, its messenger is behind foreign subscribers to Korean rival Line, managed by its namesake subsidiary of Naver, and its advertisement business was considered week compared to rivals.

Source: ZDNet Korea (zdnet.co.kr)