“How many splits is this? Let’s win over NPS” … 1.6 million shareholders and 3,000 union members ‘furious’

Kakao Corp. stunned by corporate split announcement Trade union stages protest at Pangyo Station Plaza

사진 확대 Kakao union protests against the spin-off at Pangyo Station Plaza in Bundang-gu, Seongnam, Gyeonggi Province, on the 26th. [Yonhap]

Kakao Corp. announced a corporate split to strengthen its artificial intelligence (AI) competitiveness, but the move immediately faced strong backlash. The trade union criticized it as little more than an attempt to evade responsibility, while the capital market raised concerns that it was a strategy to sidestep regulations on duplicate listings.

According to the IT industry on the 26th, Crew Union, the Kakao branch of the National Chemical, Textile, and Food Industry Labor Union under the Korean Confederation of Trade Unions (KCTU), held a ‘Kakao Split Opposition and Joint Bargaining Declaration Ceremony’ and a ‘KakaoBank Corp Strike Action Resolution Rally’ at Pangyo Station Plaza in Bundang-gu, Seongnam, Gyeonggi Province, that afternoon.

On the 21st, Kakao Corp. held a board meeting and resolved to carry out a spin-off into the new company Kakao AI and the surviving company Kakao X. The company aims to secure independent management and new growth engines by separating platform and new technology operations into Kakao AI, and fintech and content businesses into Kakao X.

A spin-off means distributing shares of the new company to shareholders of the surviving company in the same proportion when a company is split. Existing Kakao Corp. shareholders will receive shares in both companies according to the split ratio. Based on book value of net assets, the split ratio is 0.36 for Kakao AI and 0.64 for Kakao X. For shareholders, this is better than a physical split, in which the surviving company holds all shares of the new company, but it is effectively a de facto split listing.

사진 확대 [Newsis]

The union opposes Kakao Corp.’s spin-off and plans to persuade shareholders to defeat the proposal in a special resolution at the shareholders’ meeting. It said the proposal can be rejected if shareholders other than the largest shareholder vote against it. To that end, the union plans to first meet with NPS, which holds a 5.4% stake in Kakao Corp. The shareholders’ meeting is scheduled for December 17.

Kakao Corp. officially announced the corporate split by holding a town hall open talk at 10 a.m. on the 21st. The company has used open talks to share major management issues and announcements, but this time it abruptly notified employees of the schedule only half a day in advance, heightening anxiety inside the company. Because it did not disclose the specific topic in advance, speculation spread widely, ranging from a holding-company transition and a spin-off of the AI division to the sale of affiliates and even a merger with Naver.

Tensions eased somewhat after Kakao Corp. promised to maintain employment succession, working conditions, welfare benefits, and the work environment even after the split. In particular, observers said the practical impact on employees would likely be limited, as most of the core business and existing staff will move to Kakao AI and the management lineup will remain largely similar.

Multiple Kakao Corp. officials also said, “It feels as if only the company names have changed to Kakao AI and Kakao X, and since KakaoTalk and AI are being spun off together, the atmosphere is not bad at the moment.” They added, “Because the most important job responsibilities and work methods are not changing, the impact is expected to be minimal.”

사진 확대 Kakao founder Kim Beom-soo (left) and CEO Shina Chung. [Kakao Corp.]

However, the union pointed out that the lack of prior explanation and consultation with employees was a separate issue. Seo Seung-wook, head of the Kakao branch, said, “There is a widespread view that this split plan will not increase corporate value.” He added, “A proper reform plan that can solve the existing problems should come first, and only then should a split be discussed. But there is nothing like that now. We are not saying the split itself must be blocked at all costs. Rather, we cannot accept a split without diagnosing the cause or presenting concrete measures.”

The union also called for joint bargaining rather than separate negotiations. Its goal is to strengthen bargaining power by having all affiliates respond together to long-standing problems such as management controversies, performance distribution, and organizational restructuring. It also stressed that the company must provide a sufficient explanation of how the split will affect employees.

Shareholders are also cold to the plan. According to the Korea Exchange, Kakao Corp. closed at 36,350 won per share on the day, up 300 won, or 0.83%, from the previous session. For a company that once traded as high as 160,000 won per share, the decline is humiliating. Of the 12 brokerages that issued reports on Kakao on the 24th, five cut their target prices. They said the spin-off appears to be a way to bypass duplicate-listing regulations and attract outside investment, given the enormous capital required for AI investment.

Meanwhile, KakaoBank Corp. union members, who have yet to finalize wage negotiations and a collective bargaining agreement, also joined the collective action. The KakaoBank Corp. union is escalating pressure, warning of a full strike for five days from the 31st through the 4th of next month.

This article has been translated by GripLabs Mingo AI.