Game industry’s Netmarble is preferred bidder for Coway

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Game industry’s Netmarble is preferred bidder for Coway

Netmarble, Korea’s top mobile gaming company, has been named the preferred bidder for a 25 percent stake in Woongjin Coway, a water purifier rental company, in a deal that could cost it around 1.8 trillion won ($1.5 billion).

“The company participated in the bidding for the sale of Woongjin Coway and has been notified it is the preferred bidder by the financial adviser handling the deal,” Netmarble said in a public disclosure.

If the company purchases the 25 percent of Coway from Woongjin Group, it will be a controlling stake.

Netmarble said it wants to bring its expertise in digital technology to the home appliance service provider to turn the company into a smart home appliance maker with a heavy focus on connectivity.

“Coway is the top player in the home appliance rental industry,” said Netmarble Vice President Seo Jang-won, “[Coway] has the potential to become a major player on the global stage in the smart home market when combined with Netmarble’s artificial intelligence, big data and cloud technologies.”

Coway’s strong cash flow also appealed, Seo indicated on a conference call on Monday.

“Netmarble has invested in different emerging industries such as entertainment, an internet-only bank, artificial intelligence, big data and a blockchain platform. But they are all in the initial stage of development with a limited capability to generate substantial revenues,” he said.

Coway pulled off record-high earnings in the second quarter with 138.2 billion won in operating profit.

Netmarble’s recent acquisitions will push it beyond the gaming and internet industries.

Last year it bought a 26 percent stake in Big Hit Entertainment, which manages the Korean boy band BTS for about $170 million.

Woongjin Group is selling off its controlling stake in Woongjin Coway to improve its own liquidity.

The group announced in June that it would sell its 25.08 percent stake in the rental service unit three months after it bought back Coway, which was founded as a Woongjin unit in 1989.

In 2013, the group sold Coway to a private equity fund when it faced a financial crunch.

Still, some analysts expressed skepticism over the prospects for the unconventional corporate marriage between a gaming and appliance rental company.

“The deal would give a stable cash flow to Netmarble,” said Ahn Jae-min, an analyst at NH Investment & Securities. “Still, it is hard to expect synergies between games and the rental business.”

The analyst went on to note that the companies’ main client bases also differ.

“The game business is oriented toward individuals rather than households, and major users are males in their 20s through 40s, which is different from the target users of a rental business,” Seo said.

“This causes uncertainties regarding the outlook for the acquisition,” he said.

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