Naver-Dunamu merger formalized…20 trillion-won 'fintech giant' emerges

Stock exchange ratio fixed at 1 to 2.54; Song Chi-hyung becomes the merged company's largest shareholder

Dunamu becomes a subsidiary of Naver's subsidiary

Synergy expected as industry leaders unite

Possible Nasdaq listing in the future

Regulatory risks such as Fair Trade Commission review

Many hurdles remain before merging with Naver<Naver Financial>

Naver has formalized the incorporation of Dunamu, operator of the country's No. 1 virtual asset exchange Upbit, as a subsidiary. This follows Naver Financial's confirmation of a comprehensive share exchange with Dunamu. Song Chi-hyung, chairman of Dunamu, will become the largest shareholder of Naver Financial. The big deal is expected to create a fintech giant valued at around 20 trillion won, significantly shaking up the domestic finance and blockchain industries.

◇Dunamu under effective control

On the 26th, Naver disclosed that Naver Financial resolved to issue new shares to Dunamu shareholders and to acquire all Dunamu shares through a comprehensive share exchange. The method allocates 2.54 new Naver Financial shares per Dunamu share (1 share of Dunamu at 439,252 won to 2.54 shares of Naver Financial at 172,780 won). Although the enterprise values of Naver Financial (4.9 trillion won) and Dunamu (15.1 trillion won) were calculated at a 1 to 3 ratio, the total number of issued shares differed between the two companies, resulting in the difference in the share exchange ratio. Accordingly, Dunamu will become a 100% wholly-owned subsidiary of Naver Financial and thus a subsidiary of Naver's subsidiary. Naver explained the merger background by stating, "We plan to secure future growth engines based on digital assets."

Chairman Song will secure 19.5% of Naver Financial's shares and become the largest shareholder. Naver's stake will be significantly diluted, dropping to the second-largest shareholder (17%). Although the transaction is formally Naver Financial acquiring Dunamu, it is effectively more like a reverse merger. This is because not only Chairman Song but also Vice Chairman Kim Hyung-nyeon (10%), Kakao Investment (8.11%), and Woori Technology Investment (5.51%), among existing Dunamu shareholders, will obtain shares close to a majority in Naver Financial.

◇Naver delegated voting rights

Naver will receive delegated voting rights on Naver Financial shares from Dunamu's management. This will be recognized as effective control in accounting terms, meaning Dunamu's nearly 1 trillion-won annual profits will be reflected in Naver's consolidated financial statements via Naver Financial. On that day Naver's stock closed at 263,500 won, up 4.15% from the previous trading day.

From a future business perspective, industry observers say the merger synergy between the two companies could be considerable. The biggest anticipated effect is payment innovation. Naver Pay's annual payment volume reaches 80 trillion won. It has secured 34 million users domestically. However, with the advent of the AI era, the payment paradigm is rapidly shifting toward stablecoins, which has been a concern for Naver. With expectations that stablecoin issuance may be permitted domestically in the future, Dunamu's know-how could be a key to building the next-generation payment system that Naver envisions.

The emergence of a super app is also expected. The single Naver app could encompass shopping, real estate, stocks, savings and deposits, as well as virtual assets. Naver's strong intellectual properties such as Naver Webtoon and ZEPETO are also likely to combine with Dunamu's blockchain technology. Naver gave the move significance by saying, "We have acquired a new driving force to boldly challenge the global market amid the shift to a Web3 environment."

◇Regulatory risks anticipated

The market views this big deal as a stepping stone toward an eventual IPO for the integrated entity. It is seen as having earned grounds to aim for listings not only on the domestic stock market but also on the US Nasdaq. Some speculate that the integrated entity could even merge with Naver's headquarters. However, there are many hurdles to overcome, such as the Fair Trade Commission's merger review, the Financial Services Commission's recognition of exceptions to the separation of finance and industry, and restrictions on stablecoin issuance, meaning significant regulatory risks remain.

Reporters Mi-hyun Cho/Jun-ho Cha/Eun-yi Ko mwise@hankyung.com