Kakao Corporation, the operator of South Korea's top chat app KakaoTalk, said on Monday it will take over the country's biggest music streaming service, further expanding how the $7 billion internet company makes money off its self-described mobile lifestyle platform.
The South Korean giant will purchase a 76.4 percent stake in one of the country's biggest record labels and the operator of MelOn, easily South Korea's biggest provider of music streaming services, for approximately 1.87 trillion won.
Kakao will raise half of the cash needed for the purchase by issuing additional shares of its stock.
The company will issue 750 billion won in new stocks to Star Invest Holdings Limited, which Kakao said is the investment vehicle set up by Affinity Equity Partners and Loen Entertainment's previous majority shareholder. The rest will be covered by way of cash holdings and by other investors.
According to Kakao, KakaoTalk has about 39 million MAUs in South Korea with a population of 50 million, and virtually every smartphone in the country has KakaoTalk downloaded on it; MelOn has about 28 million MAUs.
The acquisition boosts the company's ability to expand into global markets by leveraging Kakao's mobile platforms and Loen's extensive K-pop catalogue. Kakao has also expanded its mobile content platform through 1boon, its video streaming platform through Kakao TV and Daum tvPot.
There are new creative possibilities in combining Loen's music content with Kakao's mobile platform. In the same way the company created an ecosystem by partnering with emoticon artists, Kakao can lay the foundation for an artist-driven ecosystem in music content as well, and "utilize the resulting high quality content to service international markets down the line," Kakao said.
"Music is one of the most loved content genre in the mobile era. It is also incredibly powerful in that one song can set trends for an entire generation and highly influence the global pop culture," said Kakao CEO Jimmy Rim. "By combining Kakao's various platforms and content services and Loen's leading music content, we expect tremendous synergy that could establish a strong foundation for global expansion."
Kakao said it expects to see a boost in user engagement in Loen's services like MelOn, adding that the acquisition will continue to solidify Leon's position as South Korea's premier music platform with new services including its streaming services based on social networks, user database-driven music curation, and artist centred online music creation communities.
"We had already established a strong partnership with Kakao as a result of our participation in Kakao Bank," said Shin Won-soo, Loen Entertainment CEO. "We expect to grow further with Kakao and become the leading content provider in Korea and beyond."