Kakao is boosted by plan for bank

Kakao’s decision to increase its holding in Kakao Bank was met positively by investors, with the stock closing up 1.14 percent in the first day of trading after the announcement.

It rose as much as 2 percent during the day.

The company said Friday that its board voted to exercise an option that would increase its ownership to 34 percent, making it the largest shareholder in Kakao Bank.

“The equity acquisition will allow Kakao to acquire 41.6 million shares of Kakao Bank in accordance with an agreement when the bank was established,” Kakao said in an electronic disclosure statement.

In the arrangement, Korea Investment Holdings will sell a 16-percent stake in Kakao Bank, the 41.6 million shares, for 5,000 won ($4.24) per share.

Sung Jong-hwa, an analyst at eBest Investment & Securities, estimated that the ownership change will cost Kakao around 208 billion won.

Becoming the top shareholder still needs the approval of regulators.

Analysts believe chances are high that the company will pass the qualifying process based on recent rulings. The Ministry of Government Legislation has already offered a favorable legal interpretation of the increase in the shareholding.

Legislation stipulating that a company with a record of violating the Fair Trade Act is not eligible to become the largest shareholder of an internet-only bank stood in the way, as Kakao Chairman Kim Beom-su has been indicted for breaching fair trade law.

The Financial Services Commission (FSC) asked for a legal interpretation from the Ministry of Government Legislation in April. The institution delivered its decision last month, saying that the chairman’s record is irrelevant to the laws concerning the top shareholder.

“After the interpretation, the FSC recently resumed the screening process,” said Sung, “The final result of the screening will likely come out in August, and Kakao will likely pass smoothly.”

Kakao Bank reported a profit in the first quarter, just 18 months after starting operations. According to a first quarter financial report, it recorded 6.6 billion won ($5.54 million) in net profit in the first quarter compared to a 5.5 billion won loss a year earlier.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]