Nexon bidding fails to draw Tencent and other major foreign companies

By Lim Chang-won Posted : June 3, 2019, 16:37 Updated : June 3, 2019, 16:37

[Courtesy of Nexon]

SEOUL -- China's Tencent and other major foreign companies have not joined a race to acquire Nexon, clouding prospects for the early sale of the South Korean game developer and publisher of Dungeon Fighter Online (DF), a popular multiplayer PC video game.

In a surprise and unexplained move, Nexon founder Kim Jung-ju and his wife have offered to sell their entire stake in Nexon's holding company, NXC. Kim, who pioneered South Korea's online game industry, owns 67.49 percent in NXC and his wife 29.43 percent. 

According to investment banks, bidding managers finished accepting bids on May 31. the main bidding schedule has been delayed twice in an attempt to attract major foreign investors such as Tencent, Amazon, Disney and Comcast, an American telecom conglomerate.

Final bids were just sent by five candidates including South Korea's leading game publisher Netmarble, and Kakao, a major web service company, and three private equity funds -- Bain Capital based in Boston, KKR headquartered in New York and MBK Partners based in Seoul.

Tencent distributes "Dungeon & Fighter" in China. More than 60 percent of Nexon's sales come from China.

"It was already certain that foreign companies would not participate in the main bidding process," a game company official said. "The acquisition price, which is more than 10 trillion won ($8.43 billion) compared to two trillion won in annual sales, is too much. It is unlikely that the sale will be completed by the end of this year under the current circumstances."

Netmarble has been aggressive, describing Nexon's intangible and tangible value as South Korea's crucial asset. Netmarble has expressed concern that foreign ownership may damage the ecosystem of South Korea's game industry and weaken its competitiveness.

For Netmarble, Nexon is a big prey that can not be missed because it could become an indomitable player in the domestic game market. There has been a general consensus in South Korea's game industry that Nexon's intellectual properties should not be snatched by foreign companies, but both Netmarble and Kakao probably need a partner loaded with cash because their spare money is not sufficient to absorb Nexon.

In 2018, Nexon's operating income rose nine percent on-year to 980.6 billion won and sales were up eight percent to 2.52 trillion won. There are low expectations on its performance this year due to growing uncertainties such as a U.S.-China trade war.
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