The government has begun the process of selling its stake in NXC, the holding company of Nexon, while the gaming industry has identified China's Tencent as a strong acquisition candidate. Tencent has continuously denied this, but as it has deep ties with domestic gaming companies, rumors about acquiring equity have emerged. However, due to concerns about securing management rights, the likelihood of a deal remains uncertain.
According to the Ministry of Economy and Finance on the 4th, the Korea Asset Management Corporation (KAMCO), the entrusted institution, published a notice on the country’s procurement website on the 30th of last month regarding the sale of NXC shares. The total number of shares for sale is 851,968, which corresponds to about 30.6% of NXC's total equity. This amount was paid to the government in kind for inheritance taxes by the family of the late Kim Jung-ju, the founder of Nexon. In-kind payment allows heirs to pay inheritance taxes with securities or real estate instead of cash. The Ministry of Economy and Finance plans to receive preliminary bid proposals by the 25th of next month and select a preferred negotiation party after the final bidding process.
The government had previously attempted to publicly sell NXC shares twice in 2023, but both failed due to the high valuation of 4.7 trillion won. The National Tax Service estimated the value of NXC equity by adding a 20% management premium to the net worth of the unlisted shares, arriving at 4.7 trillion won. The management premium is a standard method applied when valuing unlisted shares, which adds a premium to the stock price to secure management rights. The market assesses the 20% premium as significantly high. Given that the founder’s family already holds 67.67% of the equity, even if the government sells its entire stake, securing management rights would be impossible.
The industry is currently pointing to Tencent as a strong candidate for the third round of equity sales. Last month, Bloomberg reported that Tencent had contacted the surviving family of Nexon’s founder to acquire about 20 trillion won worth of Nexon shares, increasing industry attention.
However, Tencent appears to be distancing itself from this matter. Following reports from foreign media last month, Tencent denied that "acquisition reviews are not true." Nonetheless, as related reports continued to surface in domestic and foreign media, Tencent unusually issued a second clarification on the 2nd. Tencent stated, "In principle, we do not comment on rumors," and added, "Considering the various speculations circulating in the country recently, we want to make it clear that reports regarding the acquisition of Nexon are untrue." The Ministry of Economy and Finance also announced in response to reports that Tencent is a strong candidate for the sale of NXC equity that "no specific sale target has been determined."
Still, the rumors of acquisition do not easily subside due to Tencent's deep connections with domestic gaming companies. Tencent is the second-largest shareholder of Netmarble and has dispatched executives to its board, and it is also the second-largest shareholder of KRAFTON, holding global rights to 'PUBG: Battlegrounds.' SHIFT UP is also a second-largest shareholder. Kakao Games has secured a third-largest shareholder position and has been strategically investing in major gaming companies.
If Nexon games enter the Chinese market, there is a possibility that Tencent could become the second-largest shareholder of NXC, as it could take on the publishing role, creating a win-win situation. Indeed, Nexon's 'Dungeon Fighter Mobile,' which Tencent published, was released in China in May last year, generating more than 1.5 trillion won in revenue. Consequently, Nexon’s development subsidiary, Neople, achieved an unprecedented revenue of 1.3783 trillion won last year.
Additionally, there are virtually no corporations capable of shouldering such an astronomical amount of 4.7 trillion won. Tencent has the capability to handle this price. Last year, Tencent's revenue was 660.26 billion yuan (about 125.38 trillion won), and its operating profit was 194.07 billion yuan (about 36.85 trillion won).
However, opinions regarding Tencent's future decisions are divided. There is a prevailing view that the chances of a sale are slim due to the equity structure of NXC, making it difficult to secure management rights. Currently, the major shareholders of NXC are Yu Jeong-hyeon, the spouse of the late Kim Jung-ju, and their two children, who collectively own 67.6% of the equity, securing management rights. Even if the government were to sell all of its equity, it would still not reach a majority, making it impossible to secure management rights.
An industry insider noted, "Tencent has been responsible for publishing Nexon games in China and has been strategically investing in major domestic gaming companies, making it a strong candidate. However, there are hurdles regarding price, regulations, and management negotiations that complicate progress. As it stands, Tencent is distancing itself from the acquisition of Nexon equity, but it is uncertain when it might change its position."