This article was published on Jan. 9, 2025, at 9:03 a.m. on the CHOSUNBIZ MoneyMove site.
Kakao Mobility, which has become a 'headache' for the Kakao Group, is currently under investigation by the prosecution for allegations of 'call manipulation,' while the long-standing issue of investors' exit remains unresolved. Recently, it was reported that Texas Pacific Group (TPG), the second-largest shareholder, is pushing to sell its equity, but there has been no progress.
The shareholder composition of Kakao Mobility is somewhat complicated, with different interests for each shareholder. First, the largest shareholder, Kakao, appears to be taking a wait-and-see approach due to both the prosecution's investigation and the political variables from the impeachment crisis. Foreign private equity firms like TPG want to sell but find it difficult to exit due to the rising value of the U.S. dollar. In contrast, domestic financial investors (FIs) who are not significantly affected by the exchange rate are hoping to sell as soon as possible. However, they can only proceed with a simultaneous sale if Kakao's equity is sold first.
According to the investment banking (IB) sector on the 9th, VIG Partners, a domestic private equity management firm, is reportedly considering acquiring management rights in Kakao Mobility. They have looked into plans to buy controlling equity in conjunction with the second-largest shareholder TPG, but it is said to be at a standstill.
Kakao Mobility has established a complex shareholder structure with multiple large external investments. The largest shareholder, Kakao, holds a majority stake of 57.2%, while the TPG consortium holds 24.51%. The TPG consortium includes TPG, Korea Investment & Securities, Orix PE, JC Partners, BlackRock, GEM Capital, OA Mobility Co., Ltd., and Topanga Private Opportunities. The third-largest shareholder is Carlyle, with a 6.17% stake. Additionally, LG holds 2.46%, GS holds 2.04%, and Google holds 1.52%.
The FIs in the consortium have entered into an agreement with Kakao, stipulating that if Kakao Mobility is not listed by 2021, TPG would occupy at least one seat on the board and have the lead on the listing process. Currently, TPG's Shinwon Yoon and Director Seokyung Lee are on the board of Kakao Mobility.
The TPG consortium all has tag-along rights regarding Kakao. This means that when Kakao attempts to sell equity, they can demand to sell under the same conditions. This applies even when Kakao sells only a portion of its equity, not the entire amount.
The FIs also hold the right of first refusal on one another's equity. This means that when one of them seeks to sell, they have the right to buy each other's equity first. The right of first refusal is exercisable only among the FIs in the TPG consortium and cannot be exercised concerning Carlyle's equity, the third-largest shareholder.
According to the IB sector, while recent rumors about equity sales have emerged, TPG is reportedly in no rush. Kakao Mobility's recent performance has improved, so there is no immediate need to sell equity. With 8 years having passed since the first investment was made in 2017 and the prospects for an IPO already dimmed, this is seen as an indication they would prefer to observe developments rather than rush to sell at this time.
However, delving into the details reveals additional reasons why TPG finds it difficult to pursue equity sales now. Many foreign limited partners (LPs) who funded the fund are likely to oppose an exit at this time. Given that the exchange rate for the won against the U.S. dollar has skyrocketed to the point of nearing 1,500 won, LPs face potential foreign exchange losses if they exit now compared to when they invested.
An IB industry official noted that "when a PE sells a portfolio company, it is common to settle with LPs one to two months later," adding that "currently, as the value of the won has dropped significantly, LPs are understandably reluctant to settle. This issue affects not only TPG but also BlackRock, which belongs to the consortium, and Carlyle, the third-largest shareholder."
On the other hand, Korean institutions made up of the fund LPs, such as Korea Investment & Securities, are reportedly hoping for a quick exit. Because they can only exercise tag-along rights concerning Kakao's equity, not TPG's, they are left with no choice but to expect Kakao to make a decision.
However, for the time being, it appears difficult for Kakao to proactively pursue equity sales. An IB industry official stated, "After Chairman Byungsoo Kim was released on bail last year, there was an atmosphere within Kakao that 'something meaningful must be achieved in M&A deals,' but with the impeachment crisis unfolding suddenly, the overall sentiment within the group seems to be more about waiting rather than making hasty decisions."