Disney, EA, private equity firms, and a consortium including Tencent couldn't win Nexon's hand in merger.
Nexon seemed on track for a sale worth approximately 15 trillion won ($9 billion USD).
As of yesterday, the sale seems to be off according to a report from The Korea Economic Daily’s Korean Investors publication. The sale was first announced in January 2019, with potential suitors including EA, Activision, private equity firms (including Bain Capital), and a consortium including Tencent and Netmarble.
Disney was also reportedly considering a bid for Nexon, though the entertainment giant has admitted that its history in game development has been fraught with failure. A move to acquire Nexon would have come just months after Disney CEO Bob Iger’s candid reflection on the company’s history with interactive media. Ultimately, Disney opted not to bid, according to the report.
Korean Investors suggests that Nexon ultimately didn’t want to sell to a private equity firm. Netmarble and its consortium failed to convince Nexon CEO Jungju Kim of its ability to secure necessary financing.
GameDaily reached out to Nexon for comment but did not receive a reply by publication.
Had the deal gone through, it would have been the largest merger or acquisition in South Korean history. While the company is likely to stay its current course, Nexon could revisit its decision to sell.
Despite a plan to sell, Nexon isn’t struggling financially. It seems, instead, this was Kim’s exit plan from the game industry. Nexon exceeded its outlook in the first quarter of its current fiscal year, with strong performance from MapleStory, Dungeon Fighter Online, and its PC offerings in China and Korea (including EA’s FIFA Online 4, which it publishes). Nexon also operates Counter-Strike Online in China.
Had financing been secure, the Netmarble conglomerate (which included Tencent) was likely to have come away with the prize. In our January report, analyst Serkan Toto noted that in Q3 of fiscal 2018, 45% of Nexon’s revenue came from China and only 34% was earned in Korea. That ratio shifted in Q1 of the current fiscal year to 62% from China and 21% from Korea.
In its first quarter earnings report, Nexon set the table for a year of continued growth. The publisher anticipates that MapleStory, FIFA Online 4, and mobile titles will see Korean revenues increase along with those from other Asian countries and the South American region.
Based on its portfolio and performance, Nexon has a long life ahead. The attempted sale wasn’t an act of desperation, but one based in strategy and the motivations of its primary investor. And given the latter, it won’t be a surprise if the company is back on the market once Tencent, Netmarble, and friends have assurances of funding in place.
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