As Kakao Entertainment IPO Delays, Overseas Investors Resecure Acquisition Financing

GIC and Anchor PE Raise 430 Billion KRW Using Kakao Entertainment Shares as Collateral
Refinancing Needed as Acquisition Loan Matures Amid Delayed IPO

The initial public offering (IPO) of Kakao Entertainment has been delayed longer than initially expected, causing the exit (share sale) of institutional investors who invested in the company to also be postponed. Amid this, the Singapore Investment Corporation (GIC) and the global private equity firm Anchor Equity Partners (Anchor PE) have raised 430 billion KRW by pledging their shares in Kakao Entertainment as collateral. As the maturity of acquisition financing borrowed from financial institutions at the time of equity investment has arrived during the delayed listing, they refinanced (re-raised) the funds.

According to the investment banking (IB) industry on the 15th, GIC and Anchor PE recently raised 430 billion KRW by pledging common shares of Kakao Entertainment as collateral. The two investment institutions put up 4,485,239 shares held by Podo Asia Holdings and Musical & Company as collateral. Podo Asia Holdings is a special purpose company (SPC) established by GIC and Anchor PE to invest in Kakao Entertainment, and Musical & Company is an SPC established by Anchor PE for the same purpose.

The pledged shares accounted for 11.28% of the equity as of the end of last year. However, it is understood that the shareholding ratio was somewhat diluted after Kakao Entertainment attracted additional investments of about 1.2 trillion KRW from the Public Investment Fund (PIF) of Saudi Arabia and GIC earlier this year. The collateral loan was executed in two parts according to collateral rights and repayment priority: senior tranche of 390 billion KRW and subordinated tranche of 40 billion KRW. GIC and Anchor PE plan to use the raised funds to repay the existing acquisition financing.

(as of the end of 2022)

Anchor PE invested 125 billion KRW in 2016 in Kakao’s content subsidiary, the former Podotree (now Kakao Entertainment), and later invested 209.8 billion KRW in Kakao M in 2020. When Kakao Page (renamed from Podotree) and Kakao M merged in 2021, the merged company Kakao Entertainment became the second-largest shareholder. GIC is a major limited partner (LP) of Anchor PE.

As Kakao Entertainment’s content business rapidly grows, the value of investors’ equity is increasing quickly. Earlier this year, Kakao Entertainment attracted investments totaling 1.2 trillion KRW, with 600 billion KRW each from PIF and GIC, recognizing a corporate valuation of 10.5 trillion KRW. In this process, the shareholding ratio of existing shareholders is analyzed to have been diluted by more than 10%. Kakao and Kakao Entertainment used the funds raised from PIF and GIC to secure a 39.87% stake in SM Entertainment.

An IB industry insider said, “Anchor PE and GIC are regular investors in several Kakao Group affiliates, showing an investment pattern of investing large sums before listing and realizing profits through exit after listing. Since the listing of Kakao Entertainment has been delayed longer than expected, the exit timing has been postponed, leading to refinancing of acquisition financing at somewhat higher interest rates.”

This content was produced with the assistance of AI translation services.