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Netmarble will fund the bulk of the cost of its acquisition of Hong Kong-based social casino game developer SpinX through short-term debt, which represents a shift in its funding strategy compared to when it acquired Coway mostly by using cash reserves two years ago.

The South Korean gaming company agreed to acquire 100% of SpinX through its holding company Leonardo Interactive Holdings Limited for $2.19 billion (about 2.513 trillion won) in what could be the biggest gaming deal in the country, according to a filing on Monday.

The acquisition is to diversify its game portfolio and strengthen global business competitiveness, the company said in the filing.

Netmarble will make a 126 billion won down payment within five working days from the agreement date, and 80% of the deal value, including the down payment, will be paid on the expected closing date of September 17. The remaining 20% will be paid over the next four years.

In a separate filing on Monday, Netmarble said it will take a short-term loan worth about 1.78 trillion won – nearly 71% of the cost – to fund its acquisition of SpinX while using its cash on hand to pay the rest.

This marks a stark contrast to when the company acquired Coway in 2019 in a 1.74 trillion won deal. At that time, Netmarble funded 1.2 trillion won, or about 69% of the acquisition cost, through its cash reserves and the remainder through short-term debt.

The shift in the company’s funding strategy seems to reflect its intent to make the most of its strong credit profile and reserve its cash for more acquisitions, industry watchers said.

Late last year Korea Ratings assigned a rating of AA- to the company’s unsecured notes. The rating reflected Netmarble’s stable business model based on its strong position in the gaming market and a diversified business portfolio as well as its strong financial position, the credit rating agency said.

Netmarble was in a net cash position at the end of March, with its cash reserves of 1.49 trillion won exceeding its total debt of 1.17 trillion won. Its debt-to-equity ratio and debt-to-assets ratio are 49.6% and 14.1%, respectively, below the industry average.

The company’s strong ability to generate cash is also expected to help reduce its leverage quickly. Netmarble reported average annual earnings before interest, taxes, depreciation and amortization of about 400 billion won in the last four years.

With its successful investments in various companies – including Coway, NCSoft, HYBE, Kakao Bank and Kakao Games – earnings from equity method investments and unrealized gains from investments in securities also helped boost the company’s pre-tax profit, which stood at 474.6 billion won at the end of 2020. (Reporting by Ha-na Suh)