Nexon suitors must clear three tough levels to win

Netmarble

03/07/2019 04:10

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Robyn Mak
    HONG KONG, July 3 (Reuters Breakingviews) - Winning Nexon
 3659.T  will require some sweet deal-making skills. Kim
Jung-ju’s plan to sell control of his $13 billion video-games
developer has stalled, but may yet be revived. Transactions this
size are always tricky, and in this case players must clear
three challenging levels.
     Up for grabs is the outfit behind hits including
"MapleStory". In January, Nexon's founder hired banks to offload
his holding company, which owns a 48% stake in the Tokyo-listed
company, currently worth $6.2 billion. The sale had attracted
Amazon  AMZN.O , Walt Disney  DIS.N  and Electronic Arts  EA.O ,
according to local media, and was set to be one of South Korea's
largest deals ever.
    No one has managed to solve Nexon, though. Funding glitches
and disappearing bidders have plagued the process. Kim pulled
the plug last week due to price disagreements, Korea Economic
Daily reported. Interest remains high, however.
    A messy corporate structure stands in the way. Nexon suitors
could wind up with a cryptocurrency exchange and a baby-stroller
maker, which also sit in Kim’s group. Moreover, the Tokyo
listing means a new owner would be subject to Japanese taxes and
regulations. It is unclear, for example, if the holding company
sale would trigger a mandatory takeover offer for all of Nexon.
     Then there is South Korean nationalism to conquer. Any
overseas buyer would have encountered a backlash. Local rival
Netmarble  251270.KS , which submitted an offer, said selling to
a foreigner would weaken the competitiveness of the country’s
video-games industry. These concerns may help explain why the
final list of bidders only included two from abroad: U.S. buyout
shops KKR  KKR.N  and Bain Capital.
    Tencent  0700.HK  represents the final gatekeeper. The
Chinese tech titan owns the exclusive distribution licence for
Nexon's most successful game. In the three months to March, 62%
of Nexon's revenue came from the People's Republic. That makes
Tencent's support necessary for the company's future. To further
complicate matters, the $430 billion company also owns stakes in
local rivals, including Netmarble. Buying Nexon is no easy game.
    On Twitter https://twitter.com/mak_robyn  

    CONTEXT NEWS
    - Kim Jung-ju, the founder of South Korean video-games
developer Nexon, has suspended plans to sell his controlling
stake in the company, the Korea Economic Daily reported on June
26, citing unnamed sources. The deal could be revived in the
future, the newspaper added.
    - The bidding process had been delayed in May, Reuters
reported at the time. Chinese gaming and social media company
Tencent, South Korea's Netmarble and Kakao, as well as private
equity firms Bain Capital, MBK Partners and KKR submitted
initial bids in February. 
    - Kim and related parties were offering a combined 98.6%
stake in NXC Corp, the holding company that owns 48% of
Tokyo-listed Nexon. 
    - For previous columns by the author, Reuters customers can
click on  MAK/   
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    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EXPLAINER-Who is in the driver's seat in battle for S.Korean
gaming giant Nexon?     urn:newsml:reuters.com:*:nL3N21U0S9
Korean Economic Daily (Korean)    https://www.hankyung.com/economy/article/201906269569i
BREAKINGVIEWS - Chasing $13 bln Nexon throws Tencent off its
game     urn:newsml:reuters.com:*:nL3N1ZP144
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Jeffrey Goldfarb and Sharon Lam)
 ((robyn.mak@thomsonreuters.com; Reuters Messaging:
robyn.mak.thomsonreuters.com@reuters.net))