Bad Romance
Nexon put an end to its four-year-long romance with NCSOFT by selling off its equity (15.08 percent) in the company. Nexon announced that they sold them off via a block deal. Kim Taek-jin, CEO of NCSOFT, increased his stake to 12 percent by purchasing 440,000 shares. It was reported that the selling price was 181,959 won (US$161.38) per share, 7.4 percent cut from the closing price of 195,000 won (US$172.95) on Oct. 15. The stock sell-off gave Nexon 601.7 billion won (US$533.7 million) in cash.
It was in Oct. of last year that the possibility of a dispute over the managerial rights to NCSOFT was raised for the first time. At that time, Nexon scaled up its stake to 15.08 percent from 14.68 percent by buying an additional 0.38 percent equity (88,806 shares) in NCSOFT. Nexon’s previous stake is what Nexon Japan acquired from NCSOFT CEO Kim in June 2012.
Accordingly, Nexon submitted a corporate combination report to the Fair Trade Commission. The Fair Trade Act makes it obligatory for a company to report it when the company acquires 20 percent or more of another company’s all shares. If the shares are listed on the stock market, the percentage falls to 15 percent.
NCSOFT protested Nexon’s purchases, claiming that Nexon crossed the line to take part in the management of NCSOFT. But NCSOFT explained that they made simple investment to cope with a plunge in the price of NCSOFT stock.
But despite claims to the contrary, NCSOFT’s concerns became reality. On Jan. 27, Nexon declared that it will take part in the management of NCSOFT. Nexon pressured NCSOFT by sending NCSOFT a shareholder’s suggestion, which contained agenda items for shareholder meetings. The suggestion document also asked for access to a list of actual NCSOFT shareholders, a copy of the list, and the retirement of some of NCSOFT’s own stocks. Additionally, the document demanded that NCSOFT disclose detailed information about the salaries of unregistered executives who got 500 million won (US$443,465) or more annually among NCSOFT CEO Kim’s confidants, and how the salaries were calculated.
The combined total of NCSOFT CEO Kim’s stake (9.9 percent) and NCSOFT’s own stake (8.9 percent) was 18.8 percent, 3 percent higher than Nexon’s stake. But since NCSOFT’s own shares do not have voting rights, they felt huge pressure. This is because Nexon, which obtained the list of actual shareholders, was able to hold a temporary general shareholders meeting and voting showdown. But NCSOFT turned the tide with lightning speed through cross shareholding agreements with Net Marble Games led by chairman Bang Joon-hyeok.
The two companies announced on Feb. 17 that NCSOFT will obtain a 9.8 percent equity in Net Marble Games, while Net Marble Games gets an 8.9 percent equity in NCSOFT. The trade volume reached 390 billion won (US$345.8 million). The two companies jumped into the same boat while banding together via joint business projects and strategic alliances. That is to say, Net Marble Games, a mobile game leader, gave NCSOFT a helping hand.
Therefore, NCSOFT secured a tool to keep its management control with an 18.8 percent share that has voting rights. On top of that, NCSOFT’s deal with Net Marble Games paved the way for NCSOFT to make a foray into the mobile game market. As NCSOFT secured a stable stake, a regular general shareholders meeting in Feb. was held with no big announcements and decisions.
The National Pension Corp., the fourth largest shareholder of NCSOFT, approved of three agenda items at the meeting – financial statements and dividends, three more years for Kim Taek-jin as the CEO of NCSOFT and salary limits for directors.
Nexon had little choice but to express regret over the cross shareholding between NCSOFT and Net Marble Games, while agreeing to the extension of the term of NCSOFT CEO Kim. Afterwards, the rumor was going around that Nexon began to secure friendly investors. But seven months later, Nexon decided to split with NCSOFT.