Naver, the South Korean technology conglomerate, is contemplating a reduction in its control of Line Yahoo, the dominant messaging app in Japan. Currently in a 50-50 joint venture with SoftBank, Naver is considering selling part of its stake amidst a controversy stemming from a data breach that has resulted in public fallout and increased scrutiny from the Japanese Ministry of Internal Affairs and Communications. As sentiments escalate into a nationalistic Korea-Japan dispute, industry analysts speculate that the most feasible scenario would involve Naver’s stake being diminished enough to make SoftBank the largest shareholder, but not to the extent of an outright sale. Speculations suggest that SoftBank intends to increase its shares for managerial influence, potentially acquiring two-thirds of voting rights, thus allowing changes to the company’s charter. While previously there had been discussions about Naver selling all its shares, the financial implications of such a move seem untenable. SoftBank had apparently hoped to leverage the situation into acquiring Naver’s stake at below-market costs, but has faced substantial backlash from Korean stakeholders. Naver’s strategic interests are complex, encompassing various international businesses associated with Line Yahoo, including Line Manga and Naver Z, across different regions such as Taiwan, and Thailand. It has been mooted that Naver might retain its connection to Line Yahoo, simultaneously offloading its stake to bolster investment in Artificial Intelligence (AI) and to pursue more aggressive M&A strategies. Another dimension to this unfolding dynamic concerns the respective businesses intertwined with Line Yahoo. Naver’s expansive suite of overseas entreprises, centered on Line involves payment services, delivery systems and webtoons. It has been suggested that a corporate reorganization could see SoftBank take over the Japanese operations, while Naver retains interests abroad. Finally, as an alternative to stake reduction, Line Yahoo could distance its system operations from Naver to assuage security concerns, thus placating the Japanese Ministry without altering the shareholding configuration. However, the persistent debate over whether the end goal is for Naver to completely divest its stake in Line Yahoo calls into question the viability of long-term shared governance

Technology and Communications, Investments and Securities,Japan, South Korea

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