Kakao's acquisition of FreeNow is on the rocks

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Kakao's acquisition of FreeNow is on the rocks

Kakao Mobility's affiliate taxi in the streets of Seoul. [YONHAP]

Kakao Mobility's affiliate taxi in the streets of Seoul. [YONHAP]

 
Kakao's global mergers and acquisition (M&A) have hit yet another rough patch, putting a damper on the tech giant's “Beyond Korea” strategy. The company's plan for its ride-hailing affiliate, Kakao Mobility, to acquire an 80 percent controlling stake in the Germany-based taxi platform FreeNow is on the verge of falling through. 
 
The two companies are reportedly in a deadlock regarding the acquisition price. FreeNow reportedly proposed a tag of 400 billion won ($310.6 million), but Kakao's review community deemed the number too expensive and turned it down. 
 
FreeNow occupies more than an 80 percent market share of Europe’s taxi-hailing platforms, operating in 170 cities in 11 countries including Britain, France and Germany. Mercedes-Benz and BMW hold controlling stakes in the company.
 
Kakao Mobility’s March acquisition of London-based software company Splyt, which allows users to use multiple travel apps in one interface, has fueled its overseas expansion.
 
But the deal faces another obstacle due to new platform rules the European Union announced on Dec. 13, which are expected to further burden the mobility subsidiary.
 
The new policies aim to improve conditions for platform workers as the working population grows larger. Notably, they would formally recognize more digital platform operators as employers. 
 
Twenty-two million people were working for platforms in 2022, according to the EU, and that number is expected to surge to 43 million by 2025. Platform workers include those in delivery, translation, data input, babysitting, elder care and taxi driving.
 
Most platform workers are currently self-employed, which means they are not formally guaranteed to the labor conditions of traditional employees. 
 
The EU's new policies would recognize a platform operator as an employer if it fulfills at least two out of five proposed indicators: if it imposes upper limits on the amount of money workers can receive; if it supervises their performance, including by electronic means; if it controls their allocated tasks; if it controls their working hours and conditions; and if it restricts their freedom to organize their work and imposes policies regarding their appearance or conduct.
 
Member states will have two years to implement the directive once it is formally passed. 
 
About 5.5 million platform workers from delivery apps and ride-hailing services will likely benefit from the law, but it will also impose social costs on platform operators such as FreeNow, and. inevitably, Kakao Mobility if it acquires a controlling stake in the company.
 
“The acquisition price and profitability are both risks that Kakao Mobility should take into account, but, fundamentally, the company’s executives are failing to come up with a proper answer to enter the European market when platform-related regulations are becoming more stringent,” an anonymous spokesperson for the mobility service said.
 
Kakao Mobility, however, says the contract has yet to be scrapped.
 
“The deal is still in progress, and the two parties are still settling the details,” said the Kakao Mobility spokesperson. “The negotiation has been delayed somewhat because of Europe’s year-end holiday period, but the discussion is still in place.”
 
Kakao Pay's bid to acquire New York-based Siebert Financial collapsed last week due to regulatory concerns linked to the company's alleged stock manipulation during its acquisition of K-pop agency SM Entertainment.
 
Kakao Pay was initially expected to acquire a 51 percent stake in Siebert Financial, but the second round of stock purchases was terminated. Kakao Pay still retains the 19.9 percent stake in Siebert that it acquired in the first round. 
 

BY YU SUNG-KUK [[email protected]]
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