Yahoo Japan And Line Are Merging In $30 Billion Deal

By Amit Chowdhry ● November 18, 2019
  • Yahoo Japan and Line agreed to merge in a deal valued at ¥3.3 trillion ($30 billion). These are the details about the deal.

Yahoo Japan (backed by SoftBank) and Line have agreed to merge in a deal valued at ¥3.3 trillion ($30 billion). SoftBank founder Masayoshi Son has been pushing a deal to happen with Line for a long time in order to create a company that competes against larger companies in the US and China, according to Financial Times. This merger is expected to be completed in October 2020.

Together the combined companies hit $11 billion in revenue. And the combined value will make the combined entity bigger than Rakuten. The combined entity will also give Line and Yahoo Japan access to a larger pool of data thus giving them access to more ad partners.

However, Goldman Sachs analyst Masaru Sugiyama pointed out that the combined entity would still be smaller than Rakuten in terms of transaction value of their digital payments services. And the combined entity would also be trailing far behind, Facebook, Amazon, and Tencent. So merging seemed like the best option in order to avoid falling way behind as independent companies.

As part of the deal, SoftBank and Naver are going to form a 50:50 venture that would control Z Holdings — which is going to operate Yahoo Japan and Line. SoftBank and Naver owns 73% of Line and it plans to launch a tender offer for Line’s remaining shares at 5,200 yen each — which is a 13.4% premium of the stock price before news about the potential merger broke.

So this deal values Line at ¥1.3 trillion ($12 billion).

This deal advances Yahoo Japan’s presence in the mobile space as it will gain access to Line’s 164 million monthly active users across Japan, Taiwan, Thailand and Indonesia. Line is considered a rival to WhatsApp. And Line will have access to SoftBank’s ecosystem of portfolio companies.

At a news conference, Line co-CEO Takeshi Idezawa said that this merger is driven by the “sense of crisis” in the rise of technology giants across the US and Japan as reported by Reuters.

The creation of Line was driven by the need to overcome downed networks following a 2011 earthquake and tsunami in Japan. Line became especially popular due to its unique and colorful emoji characters. Line also sells merchandise for its emoji characters at brick-and-mortar locations at Times Squares in New York, Hong Kong, Shanghai, Bangkok, and Seoul.

Going forward, Z Holdings will continue to be a consolidated subsidiary of SoftBank Corp — which is a unit within the investment conglomerate SoftBank Group Corp.

SoftBank was advised by Mizuho Securities and Naver was advised by Deutsche Bank.

Featured image credit: LINE