Anchor Equity Partners invests $170 mn in Korean entertainment firm

Anchor Equity Partners has invested 209.8 billion won ($170 million) in South Korea’s content and entertainment company Kakao M Corp., just after it had dropped an IPO plan to exit from a call center operator that became the epicenter of the coronavirus infections in the Seoul metropolitan area.

The share purchase in a third-party allotment represents a 12.9% stake in the unit of the country’s most popular chat app operator Kakao Corp., valuing the company at over 1.6 trillion won, according to investment banking sources on March 16.

The Korea-focused private equity firm paid 182,771 won for new shares apiece, nearly 50% more than its rights offering price of 122,695 won in 2019.

With the investment, Anchor Equity has become the second-largest shareholder in the entertainment company, with Kakao Corp.’s ownership diluted to 78.1% from 89.8%.

Kakao M has been expanding video contents such as TV dramas and movies, while bulking up through acquisitions of domestic rivals. A number of Korean movie stars and a popular film director belong to the company and have invested as minority shareholders.

It will use the proceeds from the rights issue for contents expansion and new businesses.

DELAYED EXIT FROM CALL CENTER OPERATOR

Meanwhile, Anchor Equity's years-long effort to exit from Metanet Mplatform, a call center outsourcing company, has taken a heavy blow after its call center became the first place to report a large number of the coronavirus infections in Seoul in late February. The number of the confirmed cases at the call center has increased to 134 up to now.

On March 5, Anchor Equity withdrew from a plan to list Metanet on South Korea’s junior stock market Kosdaq after completing a book-building process. It said in a regulatory filing that the cancellation decision was made in consideration of the market conditions in which the company could not be valued appropriately.

The Hong Kong-based investment firm had acquired a 43.6% stake in the call center operator for about 100 billion won in 2012, in its first investment in the country.

Excluding Metanet, it has made hefty profits from divestments since 2017. Last year it disposed of invesments in two Korean companies – Geo-young and Health Balance - to Blackstone and TPG, respectively.

The exit from Geo-young, the country’s largest wholesale distributor of pharmaceutical products, returned about three times as much as its 150 billion won investment in six years. Blackstone had acquired 100% of the pharmaceutical product distributor from Anchor Equity and the company’s founder for 1.1 trillion won.

Anchor Equity also sold the small-sized dietary supplement manufacturer Health Balance to TPG for around $250 million.

Its other investments included 125 billion won in 2016 in KakaoPage, a digital content platform where comic series or webtoons, novels and movies are uploaded; a co-investment in the online shopping platform TMON Inc., short for Ticket Monster, with KKR in 2015; and 202.5 billion won in the coffee house chain A Twosome Place in 2019.

Kakao M is expected to make full use of the contents secured by the affiliate KakaoPage and boost profits by transforming the webtoons and web-based novels into TV dramas and movies, KTB Investment & Securities’ analyst Jingu Kim said in a note.

By Dong-hun Lee

leedh@hankyung.com