Kakao to merge with Daum

Kakao Corporation, the South Korean company behind Kakao Talk, has announced a merger last Monday with Daum Communications, the country’s second largest web portal.

The merged company will be called Daum Kakao and is valued at around 3 trillion won ($2.9 billion). Called as a reverse takeover, the deal will also let unlisted Kakao bypass the lengthy process of going public via Daum and enter the KOSDAQ stock market as soon as October.

Daum Kakao is the latest in a series of mergers in the mobile messaging app industry. In February, Facebook bought WhatsApp for $19 billion followed by Japan's Rakuten and its merger with Viber for $900 million

By joining forces, industry observers say that Kakao and Daum can now more effectively compete with their respective rivals. Daum gets a boost from Kakao to close the gap with market leader Naver Corporation in the mobile business sector while Kakao will get much needed infrastructure and resources to expand faster abroad.

Naver also happens to be the owner of Line, the chat app of choice in Japan, Taiwan and Thailand which directly competes with KakaoTalk and WeChat, another mobile messaging platform backed by China’s Telcent.

"Kakao's competitiveness in the mobile platform coupled with Daum's strengths in contents and service business know-how will fuel growth," said Daum CEO Choi Sae-hoon as quoted by Yonhap News Agency.