이 기사는 2021년 09월 10일 08시00분 thebell에 표출된 기사입니다

The merger of Kakao Corp and Kakao Commerce has boosted Kakao’s cash position, increasing available cash reserves by 464 billion won ($396.3 million) to 1.42 trillion won.

Kakao last Wednesday completed the merger with its commerce subsidiary. The merger is a rolling back of Kakao Commerce’s split-off in 2019. The move is seen as part of efforts by the South Korean tech giant to survive the intensifying competition in the ecommerce market.

After the merger, shareholders’ equity and liabilities of Kakao have increased by 5.6% and 17.6% to 6 trillion won and 2.36 trillion won, respectively, on a non-consolidated basis. The debt to equity ratio has risen from 35% to 39%. But the company’s available cash reserves have jumped by 464 billion won to 1.42 trillion won.

The merger is expected to enhance Kakao’s ability to generate cash flow. The commerce unit, which operates gift service Kakao Gifts and social commerce service Talk Deal, relies on a vast user base of Kakao Talk, the country’s biggest messaging app.

Kakao Commerce’s revenue increased from 296 billion in 2019 to 574 billion won in 2020, with an operating profit more than doubling to 160 billion won in the same period. Its operating profit margin was nearly 30%.

The commerce unit’s 2021 full year revenue is predicted to grow by more than 50% year-on-year. Its prospects for future growth are strong as well, with Kakao Talk’s monthly active users reaching 46.62 million in the second quarter.

It is also likely that the merger will help offset the impact of the absence of Melon, Kakao’s music streaming service, which was recently split off from Kakao to be merged into Kakao Entertainment, Kakao’s entertainment arm.

Since being acquired by Kakao in 2016, Melon has been a cash cow for the company, generating revenue of about 500 billion won annually. The commerce unit’s annual revenue is expected to be more than enough to offset a decrease in revenue due to Melon’s split-off. (Reporting by Seul-gi Kim)