Nexon founder scraps what could have been $16 bln gaming deal - sources (updated)

Netmarble

09/07/2019 05:54

* Tencent, other tech giants did not join bidding - paper
    * Kakao, MBK bids fell short of seller's expectations -
paper
    * Transaction would have been world's biggest gaming deal
    * Nexon shares climb 3%; Netmarble jumps 8.4% after buyback
news

 (Add Nexon share price, Netmarble share buyback)
    By Heekyong Yang and Ju-min Park
    SEOUL, July 8 (Reuters) - Nexon Co  3659.T  founder Jungju
Kim has abandoned plans to sell a controlling stake in its
parent NXC, two sources with direct knowledge of the matter
said, scuppering a potentially $16 billion deal that would have
been the gaming sector's biggest.
    Kim had been looking to sell the 98.6% stake he and his wife
hold in NXC, which in turn owns 48% of Tokyo-listed Nexon.
    Since it emerged in January, the sales plan has been dogged
by funding challenges, the intricacies of Nexon's relationship
with its biggest customer, China's Tencent Holdings  0700.HK ,
and protectionist South Korean sentiments.  urn:newsml:reuters.com:*:nL3N21F199
    "I am not picking a preferred bidder in light of market
conditions and others," its billionaire founder said in an email
sent to bidders via adviser Morgan Stanley, South Korean
newspaper Joongang Ilbo reported. 
    The paper reported that Tencent or other tech giants had not
joined the bidding, which contributed to the collapse of the
deal. 
    Tencent's participation was seen as key to any deal, since
it owns the exclusive China licence for Dungeon Fighter (DNF),
Nexon's most successful game. 
    Sources said this year that whoever won the bidding for NXC
would have to ensure Tencent was cooperative.  urn:newsml:reuters.com:*:nL3N21F199
    Bids from South Korean gaming company Kakao  035720.KS  and
private equity firm MBK Partners fell short of the seller's
expectations, while the funding capability of Netmarble
 251270.KS , another South Korean gaming firm, was in doubt, the
paper added.
    Nexon, Netmarble and MBK declined to comment. Reuters was
not able to reach Kim. Tencent has previously declined to
comment on any interest in the NXC stake. Kakao did not
immediately comment on the news, when contacted by Reuters. 
    Nexon shares rose 3% on Tuesday in a flat wider Tokyo market
 .N225 .     
    Netmarble, whose shares have been weighed down by the 
prospect of a Nexon deal, announced a share buyback worth 200
billion won ($169.53 million) on Tuesday, sending its shares up
by as much as 8.4%.     
    Taking into account the market value of Nexon and a takeover
premium of 15% - around the standard for other gaming deals,
according to Dealogic data - the deal was seen this year as
being worth about $16 billion, ranking it among South Korea's
biggest.
    Formal bidding for the stake was delayed from mid-May,
sources had told Reuters.  urn:newsml:reuters.com:*:nL4N22Q0PL
    "It seems that few bidders have financial capability to buy
Nexon with a high price tag," Lee Mina, an analyst at KTB
Securities, said.
    She said a dearth of hit games from Nexon since DNF, which
was launched in 2005, was one of the "risks" to bidders.      
    Morgan Stanley, which sources said was one of the advisers
hired by Kim to explore a sale of his NXC stake, was not
immediately available for comment. Deutsche Bank, another
adviser, according to the sources, declined to comment on
Monday.

 (Reporting by Heekyong Yang and Ju-min Park, Additional
reporting by Anshuman Daga in SINGAPORE, Writing by Hyunjoo Jin;
Editing by Himani Sarkar and Muralikumar Anantharaman)
 ((hyunjoo.jin@thomsonreuters.com; 82-2-3704-5685; Reuters
Messaging: hyunjoo.jin.thomsonreuters.com@reuters.net))