Kakao Pay seeks to acquire Loca Mobility up for sale by MBK Partners

Kakao Pay Corp., the mobile payment and digital wallet service unit of South Korean tech giant Kakao Corp., is seeking to acquire Loca Mobility Corp., up for sale by its owner MBK Partners Ltd.

Kakao Pay hopes that its potential acquisition of Loca, the second-largest public transportation card operator in the country, will help it expand its business scope as well as create synergy with affiliate Kakao Mobility Corp., which runs Korea’s most popular taxi-hailing app, Kakao T, people familiar with the matter said on Friday.

MBK Partners, a North Asia-focused private equity firm and the largest shareholder of Lotte Card Co., will open a preliminary bid on Dec. 6 to sell a 100% stake in Loca Mobility -- currently owned by Lotte Card -- according to investment banking sources.

MBK has already been in exclusive talks with some potential buyers for the sale of Loca Mobility.

Macquarie Asset Management, a unit of Australian investment banking group Macquarie, and SoCar Inc., a Korean car-sharing platform, are also expected to participate in the Dec. 6 bidding, the sources said.

MBK and Lotte Card hope to fetch some 300 billion won ($231 million) from the sale of Loca Mobility, the people said.

JP Morgan is the lead manager of the sale.

MBK’s DIVESTMENT OF LOTTE CARD

The sale of Loca Mobility is part of MBK’s efforts to exit its investment in 2019 in Lotte Card, Korea’s fifth-largest card issuer.

Back then, MBK teamed up with Woori Bank to buy a combined 59.38% stake in Lotte Card for 1.38 trillion won from Lotte Group.

Three years later, MBK put the stake up for sale, hoping to receive at least 3 trillion won. It recently drew bids from Hana Financial Group and other unidentified financial companies.

Market watchers said MBK is pushing to sell Loca Mobility first to ease the financial burden for potential buyers of Lotte Card.

In 2009, Lotte Card acquired Mybi Corp., which owns controlling stakes in Hanaro Card Corp. and Hanpaysys Co., which operate in the city of Busan and Jeolla Province, respectively. In the following year, Lotte acquired another transportation card company EB Card, operating in Incheon and the surrounding Gyeonggi Province, and rebranded it Loca Mobility in April 2021.

Following the acquisitions, Lotte launched a new transportation card Cashbee.

Currently, Loca Mobility controls 37% of Korea’s transportation card market, following TMoney Co., which commands a 60% market share.

In addition to public transportation services such as buses, subways and taxis, Loca Mobility's Cashbee card can be used for payment at convenience stores and food chain and café operators such as Lotteria and Angel-in-us. The number of stores that accept Cashbee stood at about 105,000 as of the end of September.

SYNERGY WITH KAKAO MOBILITY

If Kakao Pay succeeds in acquiring a controlling stake in Loca Mobility, the deal is expected to create synergy with Kakao Mobility, which runs transportation-related businesses such as a chauffeur service, bicycle and car rental, and navigation as well as Korea’s most popular taxi-hailing platform Kakako T.

Kakao Mobility has been evolving into a mobility-as-a-service platform for tens of millions of registered users.

In September, Kakao Mobility and Hyundai Motor Co. have agreed to launch a pilot autonomous robotaxi service by the end of this year.

Kakao Mobility’s possible business combination with Loca Mobility would also help improve its financial status.

Loca Mobility posted 14.7 billion won in net profit on sales of 147.3 billion won on a consolidated basis in the first 10 months of the year.

Over the same period, Kakao Mobility posted a net loss of 6.5 billion won on revenue of 398.8 billion won.

Write to Dong-Hun Lee at leedh@hankyung.com
In-Soo Nam edited this article.