Acquisition battle for Korean game industry ace company Nexon gets intense

The battle to take over Nexon, the number one company in the Korean game industry, is getting intense and chaotic. Two major US companies, Amazon and Electronic Arts (EA), have reportedly put in their stake to acquire Nexon, along with 3 to 4 other Korean groups including Netmarble and Kakao.

Local advantage for Korean company Netmarble

According to report in the IB and game industries on the February 28th, though Amazon and EA, which have not been mentioned in this acquisition yet, reportedly have participated in preliminary bidding to acquire Nexon.

So far, it has been known that Netmarble Consortium, Kakao Consortium and several other private equity funds will participate in the preliminary bidding to acquire Nexon. Netmarble and Kakao have also expressed their position on participating in the preliminary bidding.

It has been predicted that the Netmarble consortium has the upper hand. With the merger and acquisition of Nexon, the bargaining price alone amounted to about 10 trillion won (about US$8.84 billion), therefore, a key point of contention was about how each consortium could secure funds. Netmarble Consortium, with Netmarble at the centre and backing by the Chinese company Tencent, is expected to have the upper hand in its ability to carry out business and mobilize funds. However, things have changed since Amazon and EA have jumped in.

American companies offer global exposure

Amazon once topped the global market capitalization by beating Apple, so if it wants, there is no reason for the funds to be a problem. This also means that Netmarble Consortium is no match for Amazon’s ability to mobilise funds.

Since Amazon is a global business operator set in the US, if the buyout of Nexon happens, it can prove advantageous for the company looking to expand services to the global market and the US. Above all, it is also notable that Amazon is the world’s biggest cloud business and the trend of future games is also likely to be based on the cloud.

If Amazon takes over, employees will be less disturbed if only employment succession is guaranteed. If Amazon shows seriousness, it can emerge as a strong candidate at once.

EA, a game company, is also drawing attention because of its long-standing relationship with Nexon. It has been watching Nexon for a long time and is competitive as it shares many experiences in business. “As we are determined to jump into a new and challenging task, we are considering various ways to help make Nexon become a more competitive company in the world,” said Kim Jung-joo, CEO of the company, in a statement on the sale of its shares last month. EA has been in partnership with Nexon for a long time through its FIFA Online series, and it is known that EA and Nexon CEO Owen Mahoney has a strong connection.

Meanwhile, there is also news that Comcast, the largest telecommunication broadcasting convergence company in the US, besides Amazon and EA, has entered the battle to acquire Nexon through its subsidiary Universal. Comcast recently showed interest in the game industry by joining hands with SK Telecom to establish a joint venture specializing in e-sports.

Candidates for the sale of Nexon are expected to form a new contract this month at the earliest and in April at the latest. In December last year, Chairman Kim Jung-joo of Nexon put out his entire stake for sale (98.64 percent) including his company’s stake and that of his wife Yoo Jung-hyun. The sale is estimated to be worth about $10 billion (KRW 10 trillion) by adding a premium on management rights and shares held by NXC.

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February 14,2020

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