Kakao to split into AI and investment companies

Chung Shin-a, chief of South Korean tech giant Kakao Corp., speaks during a press conference at a Seoul hotel in Seoul, South Korea, 04 February 2025. Kakao announced a partnership with OpenAI to use ChatGPT in its new artificial intelligence service, joining a global alliance led by the U.S. AI company amid intensifying competition in the global AI market. Photo by YONHAP / EPA

Aug. 21 (Asia Today) — South Korean technology giant Kakao said Friday it will split into an artificial intelligence-focused company and an investment company in a sweeping restructuring aimed at speeding decision-making, improving capital allocation and unlocking the value of its businesses.

The company will be divided into Kakao AI, which will focus on artificial intelligence and KakaoTalk, and Kakao X, which will oversee investments in businesses including financial technology, entertainment and mobility.

Kakao said the two companies will target combined annual revenue of more than 16 trillion won ($11.6 billion) by 2030.

The board approved the corporate split Friday. Existing shareholders will receive shares in both companies based on the division ratio, according to the company.

Current Kakao Chief Executive Chung Shin-a will lead the newly created Kakao AI, while Kim Do-young, head of Kakao Investment and the group’s investment strategy office, will lead Kakao X, which will remain the surviving corporate entity.

Based on net book value, the split ratio will be 0.64 for Kakao X and 0.36 for Kakao AI.

Kakao plans to seek shareholder approval at a special meeting Dec. 17, complete the separation Jan. 1 and proceed with the relisting of Kakao AI and the changed listing of Kakao X on Jan. 27.

The move follows more than two years of efforts to streamline Kakao’s sprawling business and governance structure.

Kakao expanded from its KakaoTalk messaging platform into finance, content, mobility and other sectors, creating a complex group structure that the company said made it increasingly difficult to develop strategies tailored to individual businesses under a single decision-making system.

Kim said during an online news conference Friday that the company felt an urgent need to move faster in the AI era.

“We felt strongly that we could not afford to miss this moment in the AI era,” he said. “If we fail to move quickly now, we could miss an important opportunity to become a leader in business-to-consumer AI services.”

Kakao also hopes the split will reduce what it describes as a conglomerate discount.

According to Kakao’s sum-of-the-parts valuation based on assessments from domestic and overseas securities firms, its businesses have a potential combined value of 34.2 trillion won ($24.7 billion), compared with an average market capitalization of about 16.8 trillion won ($12.1 billion) over the past three months.

The company said individual businesses have not been fully valued by investors because they are grouped under a single company. External reporting Friday confirmed the roughly 17.4 trillion won ($12.6 billion) valuation gap cited by Kakao.

Kakao AI targets 20 million daily users

Kakao AI will position itself as an “AI core company,” concentrating on KakaoTalk and artificial intelligence.

The company plans to combine AI, advertising and commerce within KakaoTalk and develop the platform into an “agentic AI interface” capable of understanding users’ intentions and context and helping them move from search and recommendations to purchasing and payment.

Chung said KakaoTalk’s roughly 50 million users and Kakao’s proprietary AI technology will be central competitive advantages.

The company plans to combine on-device AI, server-based AI and specialized agents into a lower-cost, high-efficiency system.

By 2030, Kakao AI aims to have more than 20 million daily active AI users and increase the amount of time users spend on KakaoTalk by more than 50%.

It plans to develop agentic advertising, commerce and subscription services and generate more than 1 trillion won ($723 million) in AI-related revenue by 2030.

Kakao AI is targeting total revenue of more than 6 trillion won ($4.34 billion), earnings before interest, taxes, depreciation and amortization of more than 2 trillion won ($1.45 billion), an operating margin above 30% and return on equity above 25% by 2030.

The company expects to generate more than 700 billion won ($506 million) in cash annually after the split to finance its AI investments.

Kakao X to oversee finance, entertainment and mobility

Kakao X will serve as a future-value investment company overseeing businesses including KakaoBank, Kakao Pay, Kakao Entertainment, SM Entertainment and Kakao Mobility.

It plans to use about 2.3 trillion won ($1.66 billion) of its own investment resources and about 4.1 trillion won ($2.96 billion) held by major subsidiaries to support existing businesses and develop new growth engines.

The company plans to focus on digital assets in financial technology, global fandom and live entertainment in content and physical AI businesses such as robotaxis and robotic logistics in mobility.

Kakao X is targeting a business foundation capable of generating more than 10 trillion won ($7.23 billion) in annual revenue by 2030.

Combined revenue of the two companies is expected to grow from 8.3 trillion won ($6 billion) in 2025 to more than 16 trillion won ($11.6 billion) in 2030.

Kakao also plans to increase shareholder returns.

Kakao X will use 30% of after-tax dividends received from subsidiaries for cash dividends or share buybacks and cancellations. It may also allocate up to 30% of investment gains to additional shareholder returns.

The company plans to buy back and cancel a total of 300 billion won ($217 million) in shares during the first three years after the split.

“This separation is a decision to transform Kakao into a structure with the speed and accountability required for the AI era,” Chung said.

“Each company will establish strategies and capital allocation principles suited to the characteristics of its businesses and execute them more quickly.”

— Reported by Asia Today; translated by UPI

© Asia Today. Unauthorized reproduction or redistribution prohibited.

Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260821010007175