BackSoftBank said to seek stake in Naver’s Line messaging unit
Line has received at least one other offer for all or some of the company, prompting it to slow preparations for an IPO
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Hong Kong/New York/Tokyo: SoftBank Corp. is seeking to buy a stake in Line Corp., the mobile-messaging service controlled by South Korea’s Naver Corp., people with knowledge of the matter said. Naver shares jumped.
Line has received at least one other offer for all or some of the company, prompting it to slow preparations for an initial public offering (IPO), said two of the people, asking not to be identified as the information is private. Tokyo-based Line, which has about 340 million users, may be worth as much as $14.9 billion, according to BNP Paribas SA estimates.
Services that rely on Internet access to let users send messages or make calls for free are displacing traditional text-messaging services offered by wireless carriers such as SoftBank. This month Facebook Inc. said it would pay as much as $19 billion to acquire WhatsApp Inc., just days after Japan’s Rakuten Inc. agreed to pay $900 million for rival Viber.
“Traditional telecom calling services are in decline," said Naoshi Nema, an analyst at Cantor Fitzgerald LP in Hong Kong. “If SoftBank takes a stake in Line they are going to maintain traffic and they can make their money through gaming or their other content businesses."
Naver shares jumped 7.5% to 735,000 won at the close in Seoul, the most in more than four months. SoftBank shares rose 4.1% in Tokyo.
Nam Ji Woong, a spokesman for Naver, said the company hasn’t received an investment offer from SoftBank. Fumiko Hayashi, a Tokyo-based spokeswoman for Line, said the story wasn’t accurate and declined to elaborate. Mitsuhiro Kurano, a Tokyo-based spokesman for SoftBank, said the company doesn’t comment on rumours and speculation.
Japan, India
SoftBank’s founder, billionaire Masayoshi Son, has held talks with Line about a purchase, one person said. Japan’s No. 3 wireless company, which also controls Sprint Corp. in the US, has been acquiring stakes in providers of content including China’s Wandoujia and Finnish game maker Supercell Oy.
While Line is still aiming for an initial public offering later this year, it wants to take some time to evaluate the proposals, another person said. Selling a stake to a larger company could help Line increase its valuation ahead of the share sale, according to that person.
Line is the No. 1 mobile messenger service in Japan, Taiwan and Thailand—ahead of Facebook Messenger in all three countries, according to a 20 February report from Samsung Securities Co. citing data from researcher App Annie Ltd. Line also ranks highly in Chile and Mexico, where it competes with Microsoft Corp.’s Skype, and in South Korea where it competes with KakaoTalk.
Sticker Sales
“Line has tremendous momentum right now," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “They have a lot of users and they are using it actively."
SoftBank is the largest shareholder in GungHo Online Entertainment Inc., the maker of games including Puzzle & Dragons, and Yahoo Japan Corp., which operates the nation’s most-visited Web portal. Purchasing a stake in Line would allow SoftBank to market its games to the messaging service’s large base of users, said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. Shares of GungHo rose as much as 9.4% in Tokyo trading.
Tango, a Mountain View, California-based messaging and gaming service, has also fielded takeover advances, co-founder Eric Setton said this month. The company is valued at more than $1 billion, a person with knowledge of the matter earlier.
India Growth
Potential buyers of messenger software start-ups could include Microsoft, Google Inc. and Yahoo! Inc., as well as major phone carriers or infrastructure providers like Comcast Corp., Brian Blau, a social-media analyst at Gartner Inc., said earlier this month. Microsoft and Google had both expressed interest in acquiring WhatsApp, people with knowledge of the matter have said.
Line generated about ¥34.3 billion ($335 million) in revenue last year from its core business by selling games and stickers—cartoons or illustrations that users can send to friends, Line said this month.
“The strength of Line is the number of users," said Tomoaki Kawasaki, an analyst at IwaiCosmo Holdings Inc. in Tokyo. “If SoftBank partners with Line, both of their businesses would attract more customers."
Growth in India and Latin America could help its registered user base rise to 525 million by the end of 2014, BNP Paribas analyst Justin Lee wrote in a note to clients last week. Lee estimates Line may be worth as much as 16 trillion won ($14.9 billion) in a year’s time. The analyst rates Naver at buy. Bloomberg
Jonathan Browning in Hong Kong, Sarah Frier in San Francisco, Takashi Amano and Yusuke Miyazawa in Tokyo and Jungah Lee in Seoul contributed to this story.
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