SoftBank to create $30 billion tech giant with Yahoo Japan, Line Corp merger

Japan'sSoftBankCorpplans to merge internet unitYahooJapanwith messaging app operatorLineCorptocreatea $30billiontechgiant, as it strives better compete to with local rival Rakuten and UStechpowerhouses.

The deal, which would combine the providers of two ofJapan's top QR code payment services, offersSoftBankaccess to 164 millionLineusers and their data inJapanand Southeast Asia as it expands into services outside its core wireless business.

It also offersLinea deep-pocket patron who can offer itstechexpertise, including potentially via thegiantVision Fund.

The deal comes asSoftBankGroup founder Masayoshi Son battles to restore his reputation after a disastrous investment in office-sharing firm WeWork.

Telecoms firmSoftBankCorpsaid in a statement thatYahooJapan, which last month changed its name to Z HoldingsCorp, would aim to complete itsmergerwithLine, owned by South Korea's NaverCorp, in October 2020.

The companies plan to reach a definitive agreement by next month in a transaction that would seeSoftBankCorpand Naver form a 50:50 venture that would control Z Holdings, which in turn would operateYahooJapanandLine.

SoftBankCorpand Naver, which owns 73 per centof money-losingLine, plan to launch a tender offer forLine's remaining shares at 5,200 yen each - a 13.4 per centpremium to the shares' price before news of themergerbroke. That valuesLineat about $12billion.

Line's shares closed up 2.2 per centat 5,150 yen after the announcement. Shares in Z Holdings rose 1.2 per cent, with Naver's shares up 2.9 per centandSoftBankCorp's down 0.3 per cent.

Linehas been looking for growth through expansion into areas such as QR code payments withLinePay, but has been squeezed because of its limited funds and heavy-spending peers includingSoftBank, which has a rival service called PayPay.

ThemergerofJapan's most popular messaging app and one of the country's top onlineretailers is the latest consolidation in itstechindustry, and comes as Rakuten is expanding intoSoftBank's core business with the launch of mobile services.

SoftBankthis month completed its acquisition of onlinefashion retailer Zozo Inc, whose founder and ex-Chief Executive Yusaku Maezawa sold down his stake following a series of missteps.

Themergeris driven by the two companies' "sense of crisis" over the rise oftechgiants from the USand China,LineCEO Takeshi Idezawa told a news conference, wearing a tie inYahooJapan's redcorporate colour.

SoftBankGroup's Son frequently lamentsJapan's tardiness in emerging fields like artificial intelligence, with Monday's presentation showing even after combining the company's research and development budget would be dwarfed by overseas rivals.

YahooJapanCEO Kentaro Kawabe, who was wearing a tie inLine'scorporate green, declined to comment on which services would be combined or abolished post-merger.

Linelaunched to overcome downed networks in the aftermath of a 2011 earthquake and tsunami before building a strong following with its use of colourful emojis, eventually listing in 2016.

However, the messaging service struggled to make inroads in countries dominated by apps like Facebook's Whatapp and eventually retrenched in its core markets ofJapan, Taiwan, Thailand and Indonesia.

Coming at a time of heightened political tension betweenJapanand South Korea, themergermight be the two countries' most significant economic cooperation of the last decade, Jaewoong Lee, a South Korean serial entrepreneur and founder of Naver rival Daum wrote on his Facebook page late on Sunday.

Z Holdings will continue to be a consolidated subsidiary ofSoftBankCorp, which is a unit of investment conglomerateSoftBankGroupCorp.

SoftBankretained Mizuho Securities, a unit of Mizuho Financial Group, as its financial advisor. Naver retained Deutsche Bank.