이 기사는 2022년 03월 24일 07시36분 thebell에 표출된 기사입니다

Kakao Entertainment, the entertainment arm of platform giant Kakao Corp, spent nearly $1 billion on acquisitions last year as it looks to widen its geographical footprint and bolster its portfolio of content intellectual property.

The South Korea-based firm spent about 1.12 trillion won ($923 million) to acquire 17 businesses in 2021, according to its parent company. Nearly 95% of the total paid for the acquisitions, or 1.06 trillion won, was recorded as goodwill, which is the excess of price over the fair value of an acquired company’s net identifiable assets. It includes brand reputation, technical knowledge and controlling premium.

The company's acquisition spree was focused on expansion into North America. Kakao Entertainment bought 100% of US online comic app Tapas for 471.2 billion won, its biggest acquisition last year. The payment comprised 292.8 billion won in cash and 178.4 billion won in stock.

The company acquired another US online fiction app, Radish, for 379 billion won, paying 309.8 billion won in cash and 69.2 billion won in stock. Afterwards, it purchased Wuxiaworld, an Asia fantasy fiction platform, for 44.5 billion won through Radish.

Apart from online comics and novels, Kakao Entertainment sought to enhance its media business through acquisitions. It purchased Gleline, home to several writers known for their hit Korean dramas, for 56 billion won and Kross Pictures, a drama production studio, for 25 billion won.

Kakao Entertainment was created after a merger of Kakao Page and Kakao M at the beginning of 2021 and it absorbed Melon, Kakao’s music streaming service, in September. The company has grown further in size, with a string of acquisitions.

It recorded revenue of 1.42 trillion won in 2021, up 73% from the year before. Its pretax profit and net profit jumped 67% and 110%, respectively, to 59.3 billion won and 38.5 billion won in the same period.

Less profitable than Kakao Piccoma

However, Kakao Entertainment’s net profit margin remains below 3% due in large part to spending on acquisitions and an increase in amortization. Its amortization expense doubled to 85 billion won last year from 42 billion won in 2020, as most of the deals made by the company entailed a large amount of goodwill.

In comparison, Kakao Piccoma, formerly Kakao Japan, recorded 461 billion won in revenue last year, up 82% year-on-year. Kakao Piccoma, which focuses on the Japanese and European markets, has a similar business profile to Kakao Entertainment.

While Kakao Piccoma is smaller in scale, it has more solid profitability than Kakao Entertainment. Its pretax profit and net profit grew more than eightfold and threefold respectively to 45.8 billion won and 48.4 billion won in 2021, improving its net profit margin to 10.5% from 5% a year ago.

Kakao Piccoma is preparing for an initial public offering in Tokyo later this year.

Kakao Entertainment’s acquisition spending is expected to continue to increase this year, especially considering that the company is in talks to acquire SM Entertainment. There is no timeline for a public listing of Kakao Entertainment. (Reporting by Seul-gi Kim)