SoftBank signs $30bn deal between Yahoo Japan and Line
Tie-up aimed at creating a south-east Asia powerhouse in data and AI
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).
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.