South Korean Messaging App Maker Kakao to Merge with Internet Portal Daum

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South Korean Internet portal, Daum, is planning to merge with Kakao Corp, the maker of the messaging app KakaoTalk which is used by 93 percent of smartphone owners in the country.

According to a regulatory filing by Daum, this merger will see Daum acquire Kakao through a stock swap arrangement and subsequently change its name to Daum Kakao. The filing places Kakao’s value of at around $3 billion, and the combined firm will have a market capitalization of around $3.3 billion.

This is a reverse takeover arrangement in which Kakao will be able to enter the KOSDAQ stock market as soon as October, and bypass some of the rigmarole of arranging an initial public offering.

KakaoTalk is among a popular category of apps which use a phone’s internet connection to make calls and send text messages, bypassing the usual voice and SMS protocols. The KakaoTalk has similarities to WhatsApp, which was purchased by Facebook for $19 billion, and Viber, which was bought by Japan’s Rakuten for $900 million.

Meanwhile, some major US telecoms are experimenting in providing their own voice-over-mobile-internet services. AT&T recently started rolling out Voice over LTE (or “VoLTE”), and Verizon is preparing a similar service known as “HD Voice” to its customers this year. By providing voice services over wireless data networks, there is even potential for the quality of sound to be much higher than what’s experienced now.

Naver, a competing search portal in South Korea, saw its shares fall more than 4 percent once news of the merger between Daum and Kakao broke. Naver has its own mobile messenger service known as “Line” which is planning its own IPO launch.

Kakao, as TechCrunch notes, also has a more diverse base of services beyond KakaoTalk, including a mobile game platform, social network, streaming music platform, and photo-sharing app.

With South Korea, a country that’s enthusiastic towards cloud services, as its base, KakaoTalk could conceivably use additional funding to not only maintain its dominance at home, but also move into international markets.

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  1. David, there is a typo in the article, Facebook paid for Whatsapp incredible 19 billion, not 19 million. Best Michael