Kakao to acquire Korean music streaming operator

Seoul

CHAT app operator Kakao Corp said on Monday that it will buy control of South Korea's top music streaming service provider Loen Entertainment Inc for 1.9 trillion won (S$2.3 billion), in another push to find new revenue streams.

Kakao said that it would buy a 76.4 per cent stake in Loen, which owns music streaming service MelOn as well as a talent agency with K-Pop artists such as IU, partly by issuing 754 billion won worth of new shares to top Loen shareholders Affinity Equity Partners and SK Planet Co Ltd.

"The synergy from the acquisition will allow Kakao to generate new demand in the content business by adding music streaming to its existing portfolio of content services," the company said in a statement.

Kakao, operator of South Korea's dominant chat app KakaoTalk, is seeking to diversify its business model and reduce reliance on traditional businesses including revenue from mobile games, sale of emoticons and search revenue from its Web portal Daum. It recently launched a premium call taxi service as part of those efforts.

"This acquisition is the right move from a long-term perspective, because the company is lagging behind Naver in terms of its content offerings," LIG Investment analyst Kim Sung Eun said.

Kakao said that it would consider raising funds from additional investors if needed to pay for the acquisition. Its shares rose as much as 4.5 per cent following the announcement and were up 1.8 per cent as at 0050 GMT, outperforming a one per cent decline for the benchmark Korea Composite Stock Price Index. REUTERS