[비즈한국] Kakao is pursuing a horizontal spin-off into Kakao X and Kakao AI. Kakao X plans to grow existing core businesses such as finance, content, and mobility, while actively exploring new business opportunities. Kakao AI intends to focus on business development centered around KakaoTalk and artificial intelligence (AI). The problem is the internal backlash within Kakao.
The Kakao branch of the Korean Chemical, Textile & Food Workers' Union (Crew Union) is opposing this spin-off plan. Furthermore, they intend to persuade shareholders to vote down the spin-off proposal at the general meeting of shareholders. Even if the Crew Union fails to persuade shareholders, sustained labor-management conflict would not be favorable for Kakao. Kakao is in a situation where it must proceed with the spin-off while simultaneously persuading the union.
Why is Kakao pursuing a spin-off?
Kakao announced that it held a board meeting on August 21 and resolved to undergo a horizontal spin-off into Kakao X and Kakao AI. Kakao X will be the surviving corporation, while Kakao AI will be the newly established entity. Kakao stated that this decision was made to separate businesses with different characteristics and growth stages in order to establish execution speed and capital allocation systems suited to the AI era.
According to Kakao, Kakao AI plans to rapidly expand AI services that people can experience in their daily lives, centered around KakaoTalk and AI. Kakao X will take on the role of supporting and managing subsidiary growth, as well as discovering and fostering new growth pillars. Kakao plans to complete the spin-off on January 1 of next year, following an extraordinary general meeting of shareholders on December 17. Subsequently, it plans to pursue the re-listing of Kakao AI and the change-of-listing for Kakao X on January 27 of next year.
Kakao CEO 정신아 ( 정신아) stated, "This spin-off is a decision to transition Kakao into a structure of speed and accountability suited for the AI era," adding, "We will strive to ensure that Kakao AI and Kakao X establish strategies and capital allocation principles tailored to their respective business characteristics, execute them more quickly, and communicate the results transparently with the market."
Founder and Head of Kakao's Future Initiative Center, 김범수 (김범수), also remarked, "In the mobile era, Kakao was the first to jump into uncharted paths, creating innovation and changing the daily lives of users," and added, "As the AI era demands a different level of agility, we will redesign the growth structure with two engines, Kakao AI and Kakao X, to ensure that the results return to shareholders, users, and the entire crew."
Union seeks to persuade the National Pension Service and individual investors
When Kakao announced its horizontal spin-off plan, voices of opposition emerged immediately from within. On August 26, the Crew Union argued, "While Kakao presented corporate value enhancement and the efficiency of decision-making and capital allocation as reasons for this spin-off, the complex business structure was not the only cause for the erosion of corporate value," adding, "Protecting workers' employment and working conditions in the event of restructuring, sales, mergers, spin-offs, or business transfers following a horizontal spin-off is more important, yet sufficient information was not provided to the majority of members during this announcement process, and there were no prior consultations with the labor union."
The Crew Union did not stop at simple protests and took action. They intend to persuade other Kakao shareholders to vote down the spin-off proposal at the general meeting of shareholders. To pass a horizontal spin-off proposal, it requires the approval of at least two-thirds of attending shareholders and at least one-third of the total number of issued shares. Currently, the stake held by Chairman Kim Beom-su and related parties is approximately 24%, which is less than one-third of the total issued shares.
Kakao Branch President 서승욱 (서승욱) said at a press conference on August 26, "We believe it is worth a try because the proposal can be rejected if one-third of the attending shareholders vote against it," adding, "Since Kakao is close to what is called a 'national stock' with a majority of individual investors, I think there is room to talk with many citizens rather than just a few institutional investors."
The Crew Union also stated that they would persuade the National Pension Service (NPS). The NPS holds a 5.40% stake in Kakao. However, it is uncertain whether they will reflect the union's position. The basic principles of the 'Guidelines on Stewardship Activities for the National Pension Fund' include: 1) implementing stewardship activities for the purpose of increasing fund assets, and 2) implementing stewardship activities in a direction that contributes to increasing shareholder value in the long term. It is difficult to confirm what decision the NPS should make under the current circumstances to increase shareholder value.
Securities analysts are also struggling to predict the future. Researcher 정의훈 (정의훈) of Eugene Investment & Securities explained, "Kakao AI has gained a capital allocation structure where it can be valued based on Price-to-Earnings Ratio (PER) as a pure-play AI business for advertising and commerce, and the cash flow previously used for subsidiary support can now return to AI investment and shareholder returns," but noted, "Kakao X faces an inevitable net asset value discount due to the high proportion of listed subsidiaries, and issues like the duplicate listing of Kakao Mobility's American Depositary Receipts (ADRs) remain. Kakao AI's 2030 target presupposes explosive growth in advertising and commerce, which currently contribute minimally to revenue."
If the Crew Union fails to persuade the NPS, rejecting the horizontal spin-off will not be easy. Tencent affiliate Maximo holds a 5.74% stake in Kakao, and BlackRock of the U.S. also holds a 5.01% stake. Realistically, it is difficult for the Crew Union to persuade overseas major shareholders. Furthermore, Maximo and BlackRock have stated that they hold their stakes for simple investment purposes. Passive investors usually only exercise basic voting rights and rarely take actions that significantly influence management.
However, if Kakao pushes ahead with the spin-off while ignoring the union's opinions, it could lead to labor-management conflict. The Crew Union has engaged in collective action several times this year. If labor-management conflicts intensify and cause disruptions to business operations, the damage will ultimately return to Kakao.
A Kakao official stated, "As this spin-off is a significant change for employees, we plan to continue communicating with our members, including the union."