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Naver and CJ Group Agree to KRW 600 Billion Worth of Mutual Equity

Source: Pickool

Naver Corporation (KRX: 035420) announced that it has entered into a KRW 600 billion mutual equity partnership with CJ Group, the 13th largest conglomerate in South Korea.

The partnership aims to maximize content, logistics, and global expansion synergies.

Under the agreement, Naver will exchange KRW 150 billion shares with CJ E&M (KOSDAQ: 035760) and Studio Dragon (KOSDAQ: 253450), respectively.

In addition, KRW 300 billion worth of claims will be exchanged with CJ Logistics (KRX: 000120).

Naver will become the third largest shareholder of CJ E&M with a stake of 4.996% and the third largest shareholder of CJ Logistics with a stake of 7.85%.

Naver will also become the second largest shareholder of Studio Dragon with a 6.26% stake. As part of the transaction, CJ Group will hold 1.28% of the shares of Naver Corporation.

The collaboration between Naver and CJ Group aims to digitize all procedures and processes. Naver's internal data analysis and processing capabilities will be used to develop demand forecasting, logistics automation, warehouse optimization, logistics robotics, and autonomous driving within the logistics center.

The cooperation between Naver and CJ Group is expected to expand globally.

Since Naver and its subsidiary LINE have market competence in the South Korean and Asian markets, the two companies will develop cooperation with the entire world.

In addition to logistics, the content business is a crucial focus of the partnership. CJ E&M spun off its OTT division, TVING, earlier this month.

The company agreed to the share swap for three reasons: planning and producing premium content and IP, co-investment in production and distribution, and expanding TVING's subscriber base through TVING's original content.

As Naver has 42 million users in South Korea, the number of users will be attractive for CJ E&M to expand its market share and win the competition against Wavve, Netflix, and WatchaPlay.

Studio Dragon is working with Kakao M through MegaMonster to diversify and leverage the global channel of Naver and LINE.

The partnership is expected to help Naver acquire missing pieces in logistics and content for its Naver membership users.

However, Naver's market share in the music streaming market is only 4.7%, ranking 5th in the industry.

The partnership between Naver and CJ Group is a significant development in the tech industry in South Korea.

It will be interesting to see how other players, such as Coupang, react to this deal.

Recently, Coupang applied for trademarks related to OTT and gaming businesses, signaling the company's intention to expand into these areas.