Kakao Pay, Siebert Acquisition Deal Collapses; Korean Mobile Payment to Retain 19% Share Amid Termination

Kakao Pay and Siebert Financial Corp. announced that they have terminated their acquisition deal. The companies mutually agreed to call off their previously publicized stock purchase agreement.

According to The Korea Times, the mounting legal risks related to Kakao's management were said to be the reason for the decision. One of the main concerns was the October arrest of Bae Jae Hyun, Kakao's chief investment officer. In his arrest, he was charged with manipulating SM Entertainment's stock.

Legal Issues that Ended the Kakao Pay and Siebert Deal

The acquisition deal between the Korean mobile payment subsidiary of Kakao Corp. and the New York Stock Exchange-listed investment firm failed to proceed. The decision came after Kim Beom Su, Kakao's founder, and Hong Eun Taek, a former chief executive officer, were summoned for questioning.

Their cases were said to have already been forwarded to the prosecution office. At any rate, the cancellation of the agreement formally ended Kakao Pay and Siebert Financial's months of collaboration.

In April, they signed a contract to acquire a 51% stake in Siebert for KRW139.9 billion, or about $106 million. Then, the following month, in May, Kakao Pay acquired a 19.9% stake first, and the remaining 31.1% was supposed to be transferred next year.

Retention of Stake Ownership

However, the agreement was terminated after Siebert said in November that proceeding with the second part of the transaction would be difficult because of the legal risks. The Korea Herald further reported that Siebert Financial and Kakao Pay settled a disagreement concerning "purchaser material adverse effect," which refers to a change that may bring considerable adverse effects to a business.

As part of the new agreement, the former will retain its 19.9% stake and its right to appoint one director for the US-based financial firm's board.

"After careful consideration, we believe the decision to terminate the stock purchase agreement is in the long-term interest of Siebert and our stockholders," Siebert's chairman and CEO, John J. Gebbia, said in a press release. "This resolution places Siebert in the best position to execute on the exciting opportunities before it while removing any uncertainty that might have otherwise been present had this compromise not been reached."

Kakao Pay's chief, Shin Won Keun, added, "We are glad that we were able to quickly come on mutually agreed terms that recognize the time and resources Kakao Pay has invested in Siebert and we welcome the opportunity to continue our strategic investment in Siebert and look forward to working collaboratively with Siebert to help grow its business."

Photo by: Siebert Press Release