Tencent eyes 2nd-largest stake in Kakao Mobility amid broader Korea push

Chinese tech giant Tencent Holdings Ltd. has emerged as a surprise contender in a race to acquire a roughly 40% stake in Kakao Mobility Corp., the operator of South Korea’s leading ride-hailing app, Kakao T.

The move comes less than a week after media reports surfaced concerning Tencent’s renewed bid to buy Korea’s top gaming company, Nexon Co., signaling a broader strategic push into key segments of the Korean tech industry amid rising hopes that Beijing may lift its unofficial ban on Korean cultural content.

According to sources in the investment banking industry on Wednesday, Tencent has reportedly reached out to Kakao Mobility’s financial investors, already in talks with other suitors, to join the bidding race.

Up for grabs is an approximately 40% stake in Kakao Mobility held by financial investors, including TPG’s 29% and Carlyle Group’s 6.17%. Kakao Corp., the largest shareholder with a 57.2% stake, is also reportedly considering selling a portion of its holdings, while retaining management control.

If Tencent succeeds in acquiring the stake, it could become the second-largest shareholder of Korea’s most popular ride-hailing app operator.

The Chinese tech giant’s unexpected move comes amid delays in final negotiations between the financial investors and a VIG Partners-led consortium, including the United Arab Emirates’ sovereign wealth fund Mubadala Investment Co. and Goldman Sachs.

The VIG consortium has reportedly valued Kakao Mobility at about 6 trillion won ($4.4 billion), but the absence of preferred bidder status leaves the deal on shaky ground.

Should negotiations collapse, Tencent could step in as the leading contender, industry observers said. Other bidders still in the mix include Uber and Grab.

VORACIOUS APPETITE FOR KOREAN CONTENT POWERHOUSES

Tencent’s latest play also comes after news on Friday that it has reportedly tapped Nexon’s largest shareholders to acquire the controlling stake.

As it made a failed bid for Korea’s largest game publisher in 2019, its latest attempt appears to be more than merely speculative, said market analysts.

Should it succeed, it could own stakes in Korea’s top three game publishers, including Krafton Inc. and Netmarble Corp.

Less than a month ago, it also became the second-largest shareholder of SM Entertainment Co. by acquiring HYBE Co.'s remaining shares in the K-pop pioneer for 243.4 billion won.

It now owns stakes in the country’s three major entertainment agencies, including YG Entertainment Inc. and Kakao Entertainment Corp.

MINORITY STAKE STRATEGY, LONG-TERM PARTNERSHIPS

Tencent has invested in 581 companies – both listed and private – across 42 countries, with a total book value of 167 trillion won.

Rather than seeking control, Tencent, however, typically opts for minority stakes aimed at fostering sustained business alliances.  

Since its equity investment in Kakao in 2012, it has invested in the Korean tech giant’s affiliates, such as Kakao Entertainment and Kakao Games Corp., and has made strategic partnerships with them.

"Tencent typically maintains a hands-off approach to management in its portfolio companies," said an official from the information technology industry. "It may engage with leadership to assess strategic direction, and in some cases, it either services strong business models directly in China or acquires them for restructuring."

It has successfully localized Krafton’s global mega-hit “PlayerUnknown’s Battlegrounds” (PUBG) for Chinese gamers, for which it pays royalties to the Korean partner.

If the latest deal goes through, Tencent would remain a non-controlling but influential shareholder in Kakao Mobility, continuing its strategy of building strong, cooperative ties with Korea’s tech and content leaders.

Tencent’s renewed bid for Korean companies is expected to gain traction as Beijing signals that it may lift its unofficial cultural content ban. This shift fuels optimism for expanded business cooperation between Chinese and Korean firms.

“Amid the Chinese government’s friendlier stance toward Korean content, Tencent has been approaching various Korean companies for potential investment, including Kakao Mobility,” said an official from the IB industry.

Write to Da Eun Choi and Jun-Ho Cha at max@hankyung.com

Sookyung Seo edited this article.