Kakao clears key hurdle for planned corporate split

Kakao Corp. has cleared the first hurdle in its plan to split the company into two entities, Kakao X and Kakao AI.

According to information technology (IT) industry sources on Tuesday, only around 2 percent of shareholders expressed opposition to the merger during a period from September 7 to 21 for submitting objections.

The merger would combine Kakao Investment, Kakao’s investment arm, with Kakao X following the planned spin-off.

Kakao Investment is a wholly owned subsidiary of Kakao. The merger is aimed at securing investment resources for Kakao. If approved, Kakao X will absorb Kakao Investment’s proceeds from the sale of its stake in Dunamu Inc., as well as its holdings in SK telecom Co. and Kadokawa Corp.

Kim Do-young, Kakao X chief executive officer-designate, previously said Kakao X needs additional investment resources because Kakao’s existing 2.3 trillion won ($1.7 billion) in cash will be transferred to Kakao AI.

Kakao X plans to tap Kakao Investment’s cash and investment assets through the merger, he said.

Under Korean commercial law, a small-scale merger can proceed with board approval without a shareholder meeting unless shareholders opposing it hold 20 percent or more of the total shares issued.

The Kakao labor union and individual shareholders opposed to the spin-off had urged shareholders to submit objections in an effort to reach the 20 percent threshold but failed to do so.

The labor union had previously opposed the spin-off and urged shareholders to object to the Kakao Investment merger as its first action.

Kakao is expected to hold a board meeting on November 6 as scheduled to vote on the merger between Kakao X and Kakao Investment.