* Daum, Kakao shareholders approve merger
* Daum's attempt to amend articles of incorporation rejected
* Daum shares fall nearly 6 pct
(Recasts with details, comments)
By Se Young Lee
SEOUL, Aug 27 Shareholders of South Korean
internet portal operator Daum Communications Corp
and messaging app company Kakao Corp on Wednesday approved a
merger of the two firms in an all-stock deal that values Kakao
at more than $3 billion.
Kakao's KakaoTalk is the undisputed chat leader in South
Korea, but its global user base is far smaller than the likes of
Facebook Inc's WhatsApp or Naver Corp's Line.
The merger with Daum, South Korea's No. 2 internet search
company, will give Kakao new lines of revenue and boost its
resources for overseas expansion.
The deal, announced in May and set to be completed in
October, is also effectively a back-door listing that allows
Kakao to avoid a time-consuming initial public offering.
According to regulatory filings, Daum will issue 43 million
new shares to Kakao shareholders based on a valuation of 72,910
won per share, valuing the messaging app operator at 3.1
trillion won ($3.06 billion).
But Daum failed to muster the necessary two-thirds vote from
its shareholders for a set of changes to its articles of
incorporation, some of which could have given the merged company
greater fund-raising flexibility in the future.
Some of the changes called for giving the enlarged entity
the right to double the maximum number of shares it can issue to
200 million and to sell convertible preferred shares with voting
rights. Both could have a dilutive effect on shareholder value.
Daum spokeswoman Jody Chung said the vote rejecting the
changes to its articles of incorporation has no impact on the
merger or the company's medium- to long-term strategy.
Daum's shares ended down 5.9 percent on Wednesday, their
biggest daily percentage drop since February 2013.
"It appears that some investors may have read too much into
the rejection and speculated that there might be something going
on, but there was nothing to suggest that the merger is going to
fall apart," said Park Jung-hoon, a fund manager at HDC Asset
Management, adding that some investors may have opted to take
profit on the stock as well.
While Daum did not disclose the vote count or which
investors opposed the changes, a spokeswoman for South Korea's
National Pension Service, the world's fourth-largest pension
fund, said it voted against some of the changes to protect its
The fund, which held a 6.9 percent Daum stake as of this
month, is known to occasionally flex its muscle on ballot
proposals, voting no on 216 of 2,441 votes, or nearly 9 percent
of the time, in the first quarter of 2014.
The combined entity will be called Daum Kakao, but that
needs to be approved by shareholders at a post-merger
(1 US dollar = 1,013.9000 Korean won)
(Reporting by Se Young Lee; Editing by Michael Perry, Kenneth
Maxwell and Ryan Woo)