The South Korean entertainment giant Kakao Entertainment is valued at a massive 11 trillion won. Kakao has already spoken to its major shareholders about the plan to sell its management rights in Kakao Entertainment.
The shareholders include Anchor Equity Partners, the Saudi Arabian Public Investment Fund, and the Government of Singapore Investment Corporation.
Kakao (the largest shareholder that owns 66.03%) wants to sell its management rights in Kakao Entertainment. It is giving up control because of having trouble making the company valuable enough to go public due to issues with listing and a slow IPO market.
On April 9, Kakao announced in a public notice, “Our company is reviewing various options with shareholders of Kakao Entertainment to enhance the corporate value of the Kakao group and ensure the continued growth of Kakao Entertainment, but nothing has been finalized yet. We plan to make a further announcement when related matters are finalized or within the next month.”
Kakao Entertainment is valued at around 11 trillion won, thanks to a big investment from PIF and GIC in 2023. This high value makes it unlikely that a local company can afford to buy it.
Several major companies such as NCsoft, Krafton, and HYBE have shown interest in purchasing Kakao Entertainment. They have all the resources to help the company grow.
Kakao Entertainment has three main businesses: music, storytelling, and media production. Its popular brands include Kakao Webtoon, Kakao Page, and Melon. These brands have gained widespread popularity among consumers.
Kakao’s sales dropped by 3.2% to 1.8128 trillion won last year, but their operating profit rose by 16.5% to 80.6 billion won.
Kakao owns 42 subsidaries like EDAM Entertainment and Starship Entertainment. EDAM and Starship are the major players in the Korean entertainment industry. While EDAM manages IU, Starship Entertainment is home to IVE, CRAVITY, MONSTA X, KiiiKiii, and more.
In addition, it also owns talent agencies Management SOOP (Nam Ji Hyun, Suzy, Gong Yoo, Choi Woo Shik), BH Entertainment (Lee Byung Hun, Kim Geum Rok, Park Bo Young, Kim Go Eun), and Antenna (Park Sae Byul, Yoo Hee Yeol).
In 2023, Kakao and Kakao Entertainment jointly acquired a 35% stake in SM Entertainment for 1.25 trillion won, splitting the cost evenly. By the end of last year, Kakao owned 21.18% and Kakao Entertainment owned 19% of SM Entertainment.
The future of Kakao Entertainment’s stake in SM Entertainment is uncertain. With a combined 35% ownership, various outcomes are possible if the stake is sold. Kakao’s focus on AI and restructuring might lead to the spin-off of entertainment agencies like SM Entertainment. This could change the company’s business and lead to new growth and innovation.
