PIF, GIC to invest $964 mn in Korea's Kakao Entertainment

Saudi Arabia’s Public Investment Fund (PIF) and Singapore’s sovereign wealth fund GIC have agreed to invest a combined $964 million in Kakao Entertainment Corp., a unit of South Korea’s mobile platform giant Kakao Corp.

Kakao Entertainment on Wednesday signed a deal with Saudi’s sovereign wealth fund PIF and GIC to receive 600 billion won ($482 million) from each as an investment, according to sources of the South Korean company and investment banking industry. Kakao Entertainment’s corporate value was estimated at 10.5 trillion won for the investment.

“The investment highly evaluated the future and potential of the K-content industry,” said Kakao Entertainment CEO Kim Sung-soo.

The company has been trying to raise money through a pre-initial public offering since last year. It failed to secure 1 trillion won with an estimated enterprise value of 18 trillion won from global private equity firms such as Kohlberg Kravis Roberts & Co. (KKR) and BlackRock Private Equity Partners Inc. due to deteriorating investor sentiment amid rising interest rates and an economic slowdown.

That forced Kakao Entertainment to lower its corporate value to around 10 trillion won for fundraising from new investors.

FUTURE GROWTH ENGINES THROUGH ACQUISITIONS

The company plans to use the proceeds to seek future growth engines through mergers and acquisitions, as well as improve its financial structure. It will also resume content expansion to compete with its rival Naver Corp. in the webtoon and web novel sectors.

Kakao Entertainment has been expanding its business portfolio through takeovers of other companies. In 2021, it spent some 1.1 trillion won to buy Tapas Media Inc. and Radish Fiction Inc., digital comics and novel platforms in North America, as well as Antenna, a South Korean label behind artists such as Yu Jae Seok, the top comedian of the hit TV show Running Man.

GIC is one of the key limited partners of Anchor Equity Partners, Kakao Entertainment’s second-largest shareholder. The Singaporean sovereign wealth fund has already invested in Kakao Corp.’s content unit KakaoPage, formerly known as Podotree, in 2016, through the private equity firm.

The PIF, which has been actively investing in South Korea’s content industry, expanded its presence into the webtoon and web novel sector. The Saudi sovereign fund is the No. 2 shareholder of major game publishers – NCSOFT Corp. and Nexon Co. – with a 9.26% stake and a 9.49% in the companies, respectively.

Write to Jun-Ho Cha at chacha@hankyung.com
Jongwoo Cheon edited this article.