Kakao Mobility sale to private equity group opposed by union

A Kakao T taxi [YONHAP]

A union is opposing the possible sale of a large stake in Kakao Mobility to a private equity group, throwing another roadblock in the way of the parent company's efforts to unload shares in its subsidiary.

"Nobody will understand the management's decision to sell the company to a private equity firm," said Seo Seung-wook, who represents unionized workers of Kakao.

Kakao Mobility, which runs the Kakao T taxi-hailing app, is 57.5 percent owned by Kakao. MBK Partners, a private equity firm, is in discussions with the tech company to buy 40 percent of Kakao Mobility. If MBK Partners acquires 40 percent from Kakao Mobility, it will become the company's largest shareholder.

"It is true that there has been a discussion on selling the company," said Kakao Mobility CEO Ryu Gung-seon during an internal conference Friday.

MBK Partners declined to comment on the matter.

The original plan was to have Kakao Mobility go public, but due to the weak market and negative sentiment around Kakao and related companies, it is more difficult to get good pricing. Executives of Kakao Pay unloaded shares a month after the company went public in January this year, and this was seen as a negative by some investors.

"There is no change in our stance on the plan for the initial public offering yet," a Kakao Mobility spokesperson insisted.

A sale to a private equity group may not be ideal, as some employees might leave the company as it would no longer have the prestige and brand value of Kakao.

Kakao Mobility's Kakao T app is leading the industry with a total of 31 million member accounts. Nearly all of the taxi drivers in the country, about 250,000 of them, are using the service as of now.

Kakao Mobility began its taxi-hailing service in 2015 and spun off from Kakao in 2017. Kakao Mobility branched out into a wide variety of mobility-related services, from car rental services to the parcel delivery business. Kakao Mobility shareholders include the TPG consortium, Carlyle Group and LG Corp, and the accumulated amount of investments reached 1.1 trillion won.

Kakao Mobility and other Kakao-related companies have faced questions over whether they are overcharging consumers and the service providers, leveraging overwhelming dominance.

Since it began the taxi-hailing service in 2015, Kakao Mobility has tried to monetize its services but had to scrap the plan due to harsh backlash from both the public and the taxi drivers. In 2018, the company introduced a new service that allocates taxis immediately if the user pays an extra 5,000 won ($3.9), but took a step back and lowered the fee to 1,000 won, following public criticism.

Kakao Mobility tried and failed once again to raise the fee to 5,000 won last year.

The company was also accused of matching Kakao Blue taxis — taxis registered under Kakao Mobility's subsidiary KM Solutions — even if the users specifically request other rides. After two years of investigation, the Fair Trade Commission concluded in April that Kakao Mobility prioritized Kakao Blue drivers when allocating rides, and is currently weighing options on the penalty.

Kakao Mobility turned a profit of 27.5 billion won last year from the previous year's net loss of 37.6 billion won. Its revenue was 546.5 billion won in 2021, up 95 percent on year.

Kakao, which came under fire for its aggressive business expansion, is trying to stay away from criticism, as the tech company and related companies have been accused of competing aggressively with small, independent stores.

"I'm trying to avoid clashing with those who are comparatively vulnerable," said Kakao founder Kim Beom-su, "Our challenge is to co-exist with them and to innovate ourselves through such co-existence."

Employees are divided on the possible sale. Some are expressing outrage at the idea of departing from Kakao, while others are expecting the company to be able to push for more aggressive expansion.

More than 300 employees joined the labor union over the last week, which had only about 35 members in January, according to local reports.

In order to allay rising concerns within the company, Ryu emphasized that "we are all on the same ship together" and "I will be the first to stand against the sell-off as one of the stockholders, if it undermines employee benefits."

BY PARK MIN-JE, KWEN YU-JIN, KIM IN-KYOUNG, SHIN HA-NEE [shin.hanee@joongang.co.kr]