이 기사는 2021년 07월 09일 07:30 thebell 에 표출된 기사입니다.

Kakao Entertainment, the entertainment arm of South Korean tech giant Kakao Corp, is about to complete its acquisitions of US storytelling apps Radish and Tapas, as it pushes for expansion in the western country.

A regulatory filing said the company’s board of directors on Monday approved the purchase of shares in both US firms. If the transactions are completed on July 12, Kakao Entertainment will own 99.14% of Radish and 100% of Tapas.

The deals, worth more than 780 billion won ($680 million) in total, were announced in May, only two months after Kakao Entertainment was formed after the merger of Kakao Page and Kakao M in March.

The company’s decision to buy the two US firms was a bold bet, considering that Kakao Page and Kakao M recorded a combined operating profit of only 56.7 billion won last year.

Kakao Entertainment’s business areas include online comics and novels, digital music distribution, and film and drama production. The recent acquisitions are aimed at growing the company’s business across geographies and thereby increasing its value ahead of a planned initial public offering. This was the reason that rumors about a potential US listing spread.

If Kakao Entertainment successfully strengthens its position in the US market, this could have a positive impact on its parent company. Kakao Corp’s stock price has shown bullish momentum, giving the company the third largest market capitalization. But most of its key subsidiaries, such as Kakao Games and Kakao Bank, are less diversified in terms of geography, generating the bulk of their revenue from the domestic market.

Kakao Entertainment hired underwriters to prepare for an IPO in 2019. The timeline is uncertain yet but many expect the listing will take place in 2023. This means the company has about two years to show the benefits of the acquisitions.

Radish and Tapas are unlikely to turn profitable in a short period. Radish’s net loss increased more than tenfold to 83.7 billion in 2020. Tapas’s revenue grew more than fourfold to 16.2 billion won last year, but the company recorded 900 million won in net loss, which is expected to widen in the future.

But net losses may not hurt investor interest in Kakao Entertainment as long as it has a growth potential, as seen in Coupang’s New York listing. (Reporting by Pil-woo Choi)