South Korean tech giant Kakao Corp. has decided to scrap its plan to sell some 10 percent of its ride-hailing arm to a private equity fund, the firm said Thursday. It currently holds a 57.5 percent stake.
The latest decision comes as the result of a monthslong tug-of-war between the company and the firm’s union. The union has repeatedly asked the firm to halt the plan after Kakao in June announced the plan to sell “some 10 percent,” or as much as 19 percent, of Kakao Mobility to MBK Partners, expressing the hope to eventually become the ride-hailing arm’s “second-largest shareholder.” The current second-largest shareholder is TPG Consortium with 29 percent.
Unionists explained that MBK Partners’ involvement could turn the ride-hailing business “into a target of speculative investment.”
“We have decided to halt the review of changing the shareholder structure of Kakao Mobility to respect the conclusion that our union has come up with,” Kakao’s Corporate Alignment Center, which oversees operations of Kakao’s subsidiaries, said in a statement.
“We respect the union’s will to continue to our company’s sustainable and social growth and plan to provide support,” it added.
Kakao’s union members accepted the latest decision with open arms, as its head Seo Seung-wook lauded it as the “result of active participation of the Kakao community and employees.”
Kakao Mobility, which was spun off from Kakao in August 2017, is valued at approximately 8.5 trillion won ($6.5 billion). It operates the popular Kakao T app, offering taxi-hailing, delivery, parking and navigation services, which has so far amassed more than 30 million users.
Kakao’s plan to sell part of its controlling stake of Kakao Mobility to MBK Partners came as its success and rapid growth was met with strong resistance from the traditional taxi industry, sources say. Kakao Mobility’s attempt to launch a carpool service in 2018 was unsuccessful due to this resistance.
Noting Kakao’s possible “monopolization of the mobility industry,” Kakao founder Kim Beom-su -- who is now the head of the Kakao Future Initiative Center, but stepped down from all other chairman posts as of May -- and Kakao Mobility CEO Ryu Geung-seon were scolded by lawmakers to “uphold their social responsibility by respecting small businesses,” during a parliamentary audit last year.
Experts say that the nation’s strong regulations and union opposition stand as major hurdles for Kakao Mobility’s expansion.
“The latest decision seems to be a move to avoid further criticism of monopolization ahead of an upcoming parliamentary audit this year,” said Wi Jong-hyun, a business professor at Chung-Ang University.
“Kakao Mobility’s revenue sources are currently limited with the law banning its entry into other platform businesses and industries. Kakao’s plan was to become the ride-hailing arm’s second-largest shareholder to pursue such businesses behind MBK Partners more freely, but for now, its only option is to maintain the revenue sources.”
Kakao Mobility reported an operating profit of 12.6 billion won, turning to the black for the first time since its spinoff in 2017, according to a regulatory filing. It had reported an operating loss of 12.9 billion won in 2020.