South Korea’s top mobile messenger operator Kakao Corp. unveiled a 1.87 trillion won deal to buy control of South Korea’s top music streaming service provider, Loen.
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Kakao said its mobile platform and LOEN’s content can generate new business opportunities, adding that it aims to pave ways for local musicians to tap overseas markets.
As per the deal, Kakao will purchase a 76.4% stake worth $1.54 billion in LOEN, operator of MelOn.
MelOn is the fourth largest music streaming service in the world and the only major service to be based outside the music streaming strongholds of Europe and North America.
Kakao shares pared gains and were up 0.6 percent as of 0337 GMT as investors scrutinized the merits of the deal and factored in the dilution impact from new shares being issued to help finance the deal. “It is also incredibly powerful in that one song can set trends for an entire generation and highly influence global pop culture”, said Jimmy Rim, CEO of Kakao. Also, It will utilize its cash and plans to seek outside investments if necessary.
In 2013, Kakao made its first foray into the local music market by launching its social networking music service KakaoMusic in collaboration with Bugs Corp.
Kakao is seeking to diversify its model and reduce reliance on traditional businesses, which are slowing partly due to increasing competition from rivals such as Naver Corp. The KOSDAQ market lost 1.11 percent.
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The company’s Loen Tree agency is home to popular K-pop starlet IU, while its Starship Entertainment is home to music heavyweights Sistar and K.Will as well as idol boy band Boyfriend. Following Monday’s announcement, it was revealed that that service will continue after the merger, although many industry insiders remain skeptical as to its continued operations. SK Telecom had Loen run MelOn starting in 2009 and the business thrived.
