Kakao has cleared the first hurdle in its planned corporate spin-off. Shareholder opposition to the merger of the surviving entity KakaoX with Kakao Investment stayed in the 2 percent range, allowing the merger process to proceed with only a board resolution and without a shareholder meeting.

On Sept. 22, the industry said Kakao accepted shareholder objections to the absorption merger of Kakao Investment from Sept. 7 to Sept. 21. Shares held by dissenting shareholders were tallied at 2 percent of total outstanding shares.

Under the Commercial Act, when conducting a small-scale merger, approval at a shareholder meeting is required if shareholders holding 20 percent or more of total outstanding shares oppose it. With dissenting shares far short of 20 percent this time, Kakao can skip a shareholder meeting and proceed with the merger by board resolution.

Kakao’s labour union and some minority shareholders opposed the spin-off and sought to rally at least 20 percent dissenting shares to bring the merger agenda to a shareholder meeting, but fell short of the threshold.

The merger with Kakao Investment is a step to secure investment funds for KakaoX, the surviving entity after the spin-off. Kakao plans to split the company in January into KakaoX, which will handle platform, content and investment businesses, and KakaoAI, which will take charge of KakaoTalk and AI businesses.

In the split, about 2.3 trillion won in cash held by the current Kakao will be transferred to KakaoAI. KakaoX plans to use Kakao Investment’s cash and investment assets to establish its own investment resources.

Kim Do-young (김도영), the designated CEO of KakaoX, said at a meeting with minority shareholders on Sept. 16, "Because 2.3 trillion won in cash held by the current Kakao will be transferred to KakaoAI, KakaoX needs investment funds." He added, "We plan to use Kakao Investment’s cash and investment assets through the merger."

Kakao plans to hold a board meeting on Nov. 6 to approve the absorption merger plan for Kakao Investment. If the process proceeds as planned, KakaoAI and KakaoX will launch in January next year.