Kakao Corp. is seeking to sell its 66% stake in Kakao Entertainment, abandoning previous plans to take the unit public as South Korea’s market conditions deteriorate, according to investment banking sources familiar with the matter.
The mobile platform giant recently notified major financial investors of its intention to divest from the entertainment subsidiary, which operates across music, webtoons, and film production. These investors include Singapore’s GIC, Saudi Arabia’s Public Investment Fund, China’s Tencent, and Anchor Equity Partners, which collectively hold significant minority positions.
Kakao Entertainment’s enterprise value was estimated at 11 trillion won ($7.4 billion) in 2023 when it attracted $964 million from sovereign wealth funds. After acquiring K-pop powerhouse SM Entertainment in 2023, valuations temporarily surged to around 20 trillion won, but performance issues at several acquired units have since increased debt concerns.
The company has been actively pruning unprofitable assets, including liquidating US-based Tapas Media and Radish Fiction, digital platforms acquired for approximately 1 trillion won in 2021. Since launching an aggressive expansion in 2021, Kakao Entertainment’s subsidiary count ballooned from 14 to 53 in just two years.
Potential buyers include gaming companies NCSOFT and Krafton, entertainment rival HYBE, and private equity firms, according to investment bankers. While long-term investor Anchor Equity may use this opportunity to exit, more recent investors GIC and PIF might retain their stakes due to valuation concerns.
Despite operating challenges, Kakao Entertainment reported a 16.5% increase in operating profit to 80.6 billion won in 2024, even as sales declined 3.2% to 1.81 trillion won.
