Naver and Dunamu Merge: A 20 Trillion Won Digital Finance Giant is Born

Source: DecenterKorea Original Title: '20 trillion fintech giants' born… What are the key points to watch in the Naver-Dunamu merger? Original Link:

Merger of Exchanges and Financial Institutions

Naver's financial subsidiary Naver Financial has announced a merger with the cryptocurrency exchange Dunamu, marking the birth of a fintech giant valued at 200 trillion won. This merger is expected to trigger seismic changes in the digital financial market, including payments, remittances, and stablecoins.

Naver Financial and Dunamu held a board meeting on the 26th, approving a comprehensive stock exchange proposal between the two parties. After approval at the shareholders' meeting scheduled for May next year, Dunamu will become a 100% subsidiary of Naver Financial, thereby becoming a grandchild company of Naver. Naver stated: “Through artificial intelligence (AI), blockchain, and payment infrastructure technology, the digital transformation of finance is accelerating. This is to lay the foundation for the challenges of Web3 and the future digital financial industry.”

Stock Exchange Ratio and Business Valuation

The stock exchange ratio between Dunamu and Naver Financial is set at 1:2.54 (considering the number of shares), with an enterprise value ratio of 1:3.06. After the exchange is completed, Dunamu's Chairman Song Ji-seong and Vice Chairman Kim Hyun-nyeon will hold 29.5% of Naver Financial shares, becoming the largest shareholders. Naver, which currently holds 70% of Naver Financial, will be reduced to about 17%, becoming the second largest shareholder. However, in order to incorporate the two operators into Naver's subsidiary system, their voting rights will be delegated to Naver.

The non-listed companies Naver Financial and Dunamu have respectively assessed their enterprise values at 49 trillion KRW and 151 trillion KRW. Therefore, the enterprise value ratio for the comprehensive stock exchange between the two companies is 1:3.064. However, since the actual exchange is conducted on a per-share basis, the enterprise value is divided by the number of issued shares to calculate the per-share exchange price.

Although Dunamu's enterprise value is about three times that of Naver Financial, Dunamu has approximately 23% more shares issued compared to Naver Financial. Dunamu has about 34.86 million shares issued, while Naver Financial has 28.36 million shares. As a result, the exchange price per share is 439,252 KRW for Dunamu and 172,780 KRW for Naver Financial, with a ratio of 1:2.5422618, which is less than 1:3.

Both companies are private enterprises, and various methods such as asset value, income value, and comparative analysis with similar companies can be applied when assessing enterprise value. Both companies stated that they have undergone evaluations by external assessment agencies, choosing a cash discount model that can appropriately reflect the future income or cash-generating capabilities of the enterprise. It is reported that they also made slight adjustments to the exchange ratio based on factors such as the status of the largest shareholder after the merger and the requirements of existing investors.

Regulatory Approval and Shareholders Meeting

After the successful merger, Naver will embrace Dunamu and officially enter the global market. This is not just a simple business expansion, but an effort to seize financial hegemony in the Web3 era. With the emergence of large digital financial enterprises valued at 200 trillion won, there are welcoming voices from the industry, but the calculations for shareholders have become complicated.

Industry experts believe that given the stock exchange ratio is lower than the market's initial expectation of 1:3, some Dunamu shareholders' opposition is inevitable. A researcher from a securities firm stated: “Shareholders in favor of the merger may exercise their right to request a stock buyback, and in the worst-case scenario, the merger itself may be vetoed.”

The exercise price for the stock buyback request of Dunamu is 439,252 KRW per share. If the exercise scale exceeds 1.2 trillion KRW, the stock exchange contract may be terminated. As long as about 8% of the major shareholders, including Kakao Investments, which currently holds 10.89% of Dunamu's shares, Korea Technology Investment (7.2%), Hanwha Investment & Securities (5.94%), and Hive (2.5%), exercise the stock buyback request, minority shareholders will face the situation of being unable to sell their held shares.

Mergers require a special resolution from the shareholders' meeting, requiring the approval of more than two-thirds of the attending shareholders and more than one-third of the total number of shares issued. Unlike Naver Financial, where the major shareholder holds the majority of shares, Dunamu needs about 27% additional support after excluding the shares of the management team, such as Chairman Song and Vice Chairman Kim, who hold (38.63%). Therefore, persuading shareholders will be key.

The delay in regulatory approval may also pose a risk to the merger. Clearly considering this, Naver and Dunamu have made regulatory approval a prerequisite for the success of this merger. Unlike the usual practice of holding the shareholders' meeting and obtaining regulatory approval simultaneously, they plan to secure regulatory approval first, and then hold the shareholders' meeting in May next year.

Naver and Dunamu still need to undergo merger reviews by the Fair Trade Commission. Since there is no precedent for the merger of financial technology and cryptocurrency exchanges, it may take a long time to assess the impact of the merger of the two companies on the market.

Naver Chairman Lee Hae-jin and Chairman Song are scheduled to hold a joint press conference on the 27th to directly explain the business plan after the merger. They plan to publicly disclose the background of the merger and the synergy strategy to persuade shareholders and gain understanding from the market and regulatory authorities.