Technology: SoftBank signs $30bn deal between Yahoo Japan and Line
Japan’s biggest search engine and messaging app are set to merge under a deal agreed by their parent companies.
SoftBank-backed Yahoo Japan and messaging app Line have agreed to merge as Masayoshi Son seeks to create a south-east Asian powerhouse in data and artificial intelligence worth ¥3.3tn ($30bn).
SoftBank and Naver, the owner of Line, will each hold 50% of a new holding company that will operate Line and Z Holdings. By uniting, SoftBank and Naver hope that they will better position search portal Yahoo Japan, Line’s messaging app and their other businesses to compete against rivals from the United States and China.
The deal follows years of courting by Mr Son, SoftBank’s founder, who has long pitched the merger as a way to compete against rivals in China and Silicon Valley, according to people familiar with the discussions.
Under the framework announced on Monday, Line will first be taken private through a tender offer at a proposed price of ¥5,200 per share, which represents a 13 per cent premium to Line’s share price on November 13 before news of the talks broke last week.
Z Holdings, a subsidiary of SoftBank’s telecoms arm formerly known as Yahoo Japan, and Naver, the South Korean internet search group that owns 73 per cent of Line, plan to each spend ¥170bn on the tender offer.
The merger, which is expected to be completed in October 2020, values Line at ¥1.3tn, creating a group with a combined market value of ¥3.3tn. The group’s $11bn in combined revenue would put it above domestic rival Rakuten with access to a growing number of mobile users in south-east Asia.
The multi-tiered tie-up will involve SoftBank’s telecoms arm, which owns a 45 per cent stake in Z Holdings, creating a 50-50 joint venture with Naver. The complex scheme will allow the South Korean group to maintain control over Line. Following the merger, Z Holdings will remain a listed entity, which will become a consolidated subsidiary of SoftBank’s telecoms arm.
Analysts have often called for the two groups to combine, saying a deal would give Line and Yahoo Japan access to a bigger pool of data and stronger negotiating power with its advertisers.
It also strengthens Yahoo Japan’s presence in the mobile space by giving it access to Line’s 164m monthly active users in Japan, Taiwan, Thailand and Indonesia.
For WhatsApp rival Line, the merger allows it to join SoftBank’s ecosystem and benefit from its massive investment capability in AI and other technologies through the $100bn Vision Fund.
“It makes perfect sense for all the parties involved with immediate synergies in search, payment, advertising, ecommerce and content,” CLSA analysts said after merger talks were reported last week.
Following a surge last week, shares in Z Holdings briefly climbed 5 per cent on Monday morning after the deal was formally announced, while Line rose 3.2 per cent. Shares in SoftBank’s telecoms arm fell 0.5 per cent and Naver gained 0.9 per cent.
Big in Japan
While Google is the predominant search engine in the US and Europe, Yahoo is Japan’s most popular search engine.
More than 50 million people visit Yahoo Japan’s website every month.
Yahoo Japan is no longer linked to its US namesake, which sold its remaining stake in the company in 2018.
Line, which is owned by South Korean company Naver, has roughly 80 million users in Japan and a similar number in Southeast Asia and Taiwan.
The app itself is perhaps best known for cartoonish stickers, a feature which its competitors have also adopted.
In recent years, Yahoo Japan’s parent company, Softbank, has bet billions on primarily Asian-based tech companies.
The deal could also make it a dominant player in the payments market in Japan.
Softbank already has its own payment service PayPay.
With this deal, it will scoop up Linepay, which is used by many of its competitors.
“I think there will be a lot of game-changing issues that will go on,” said Mr Takeshita.