Nexon sells its entire stake in rival NCsoft

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Nexon sells its entire stake in rival NCsoft

Nexon, Korea’s No. 1 online gaming giant, announced it was selling off its stake in rival NCsoft, wrapping up a conflict between the two parties over management of the second-largest player.

The Tokyo-based Korean game developer made a public announcement on Friday for the Tokyo Stock Exchange, where it is listed. It said it would sell its 15.08 percent stake in NCsoft, or 3,306,897 shares.

“Although it’s been more than three years since we invested in NCsoft, there was little significant synergy,” Nexon said in its public notice. “Based on our principle of contributing to earnings for shareholders by boosting capital efficiency, we are selling off our shares in NCsoft.”

A spokesman from NCsoft said, “Taking this as an opportunity, we want to build up a good relationship with Nexon, and we will do that.”

The 3.3 million shares held by Nexon were sold for 183,000 won ($162) each, totaling about 605 billion won. That was cheaper than what it paid for the shares in 2012, which was 250,000 won per share.

But the company said it earned about 6.2 billion yen ($52 million) in profits through the sale, apparently thanks to the strengthened Korean won against the Japanese currency.

Coordinated by Morgan Stanley, the trade was made Thursday afternoon through a so-called block deal, selling or buying stocks in bulk when the stock market was closed.

NCsoft CEO Kim Taek-jin has bought 440,000 of the 3.3 million shares, the company said in a public notice Friday. With the purchase, his stake in NCsoft rose to 11.99 percent and actually totals more than 12 percent if you include shares held by his relatives and allies. Based on current information, the largest shareholder of NCsoft is the National Pension Service of Korea, holding 12.22 percent.

But the largest shareholder can’t be confirmed because other buyers in the deal have not disclosed their purchases yet. They are required to make public their ratio within five days of the deal if they hold more than 10 percent of a stake in NCsoft.

Nexon appeared to conclude that the sale was the best way to resolve a conflict between the two companies over management of NCsoft, industry observers said.

When Nexon founder Kim Jung-ju announced in 2012 his decision to buy a 14.68 percent stake in the rival company led by his longtime friend Kim Taek-jin (the two attended the elite Seoul National University together), the deal surprised the Korean IT industry.

The two Kims said they strived for a common goal with the deal: the joint takeover of Electronic Arts (EA), a leading global game software developer. But that plan eventually failed.

The two Kims were at odds afterwards. They also failed to reach a consensus over developing joint gaming software.

In October 2014, Nexon’s buying of an additional 0.4 percent stake in NCsoft became another source of disagreement, as it held more than 15 percent of all shares. Under current law, Nexon filed a report to the Fair Trade Commission on the official merger of the two companies.

Although Nexon’s Kim said at the time that the purchase was just an ordinary investment by the company and he didn’t have any other intention, market insiders thought he was attempting to acquire the second-largest gaming player. NCsoft’s Kim held a 9.9 percent stake in his company at the time.

Early this year, Nexon bluntly said it would get involved in the management of NCsoft, igniting a severe confrontation between the two companies. The conflict receded after NCsoft brought in Netmarble Games Corporation, another gaming player, as a “white knight” to help defend itself against a hostile takeover. Netmarble acquired an 8.93 percent stake.

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