Carlyle seals $200 mn investment in Kakao Mobility

The Carlyle Group has agreed to buy $200 million worth of new shares in Kakao Mobility Corp. as a pre-IPO investment in the transportation arm of South Korea’s top messaging app operator.

Kakao Mobility, the country’s dominant taxi-hailing app, is also in the final stages of talks with Google Inc. to raise an additional $50 million to $100 million through a rights offering, according to a source with knowledge of the matter on Feb. 18. Kakao is expected to sign a share purchase agreement with Waymo, Google's autonomous driving arm, as early as next week.

The Korean company is seeking to raise a combined $300 million in third-party placements for operating expenses, before it pushes for an IPO next year.

Carlyle is buying 3.8 million shares to be issued by Kakao Mobility at 58,205 won apiece for a total of 220 billion won ($200 million), Kakao Corp. said in a regulatory filing on Feb. 18.

Kakao Corp. had a 69.26% stake in the mobility unit as of the end of September 2020, after it sold a 30% stake to TPG in 2017. It did not provide details about Carlyle's ownership in the mobility arm. 

The pre-IPO funding gave Kakao Mobility a value of around 3 trillion won, about twice its previous value projected by TPG in 2017. TPG had invested 500 billion won for a 30% stake in Kakao Mobility, shortly after it was spun off from the messaging app operator in 2017.  At that time, the transportation services app sold both its existing and new shares to TPG for 68,027 won apiece, 17% above the latest rights offering price.

In the following year of 2018, TPG sold down one-tenth of its investment, or 50 billion won, to institutional investors, including two US pension funds and a Hong Kong public fund. 

Since launched in March 2015, Kakao Mobility has expanded into designated driving and parking lot search services, as well as ride-sharing services. Last March, it received approval from the Ministry of Land, Infrastructure and Transport to test operate its own autonomous driving technology.

Kakao is likely to use the new funding to bolster its self-driving capabilities. Further, it expects to cooperate closely with Waymo on self-driving technology, a key component in the Mobility as a Service (MaaS) platform that Kakao Mobility is pushing for to provide all transportation-related services via a single app, Kakao T.

SK'S MOBILITY SPIN-OFF IN FUNDING ROUND

Carlyle highly values Kakao Mobility’s dominant position in the country’s taxi-hailing service market, given its 80% share and 27 million users. Last year, the US private equity firm invested around 400 billion won in KB Financial Group, South Korea’s largest banking group. It is currently in the final stages of talks to buy the country’s No. 2 bakery chain Tous Les Jours.

Kakao Mobility's rights issue comes as the country's largest mobile carrier SK Telecom Co. is looking to raise up to 300 billion won for its mobility spin-off T Map Mobility Co. Around four to five strategic investors and private equity firms, including IMM Private Equity and Affirma Capital, were recently shortlisted for investments in the SK spin-off.

As a latecomer to the domestic mobility industry, SK Telecom also launched a joint venture with US ride-hailing company Uber Technologies Inc. last year, to challenge Kakao Mobility.

Write to Chae-Yeon Kim at why29@hankyung.com
Yeonhee Kim edited this article.