Chat app maker Kakao is merging with Korea’s second largest portal company Daum

Chat app maker Kakao is merging with Korea’s second largest portal company Daum

Kakao, the Korea-based company behind the Kakao Talk mobile messaging app, is merging with Daum, the country’s second largest internet portal. The news is surprising, since Kakao had been tipped to go public before 2015 at a valuation of over $2 billion.

The Yonhap News Agency reports that the merger — which is a stock swap arrangement — will create a company worth three trillion Korean won ($2.9 billion) but there is no confirmed price at this point. The new entity — ‘Daum Kakao’ — will become the second largest company listed on the KOSDAQ, according to the news agency.

Daum announced the merger this morning (hat tip Tech In Asia), but it is said to be formally announcing specific details of the deal later today. The deal is expected to be completed by October 1.

Kakao Talk has 140 million registered users worldwide, but Korea is its strongest market. The chat app is estimated to be installed on over 90 percent of smartphones in Korea, but it has not extended its dominance overseas. Instead, Kakao Talk has watched rivals Line (Japan — 400 million registered users) and WeChat (China — 390 million active users) spend large advertising budgets in a bid to attract users in Asia, Latin America, Europe and beyond.

It remains to be seen if Kakao Talk is too late to expand outside of Korea with any great success, but the company is already profitable, having made $203 million from its most recent financial year.

The deal with Daum suggests that Kakao Talk will continue to focus its primary efforts on Korea, where its gaming business has been a particular success. That’s demonstrated by the fact that nine of the top 10 grossing games in the Google Play store in Korea run on the Kakao Talk games platform, per data from App Annie.

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Headline image via Park Ji-Hwan/AFP/Getty Images

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