TOKYO – Company Z Holdings, operator of Yahoo Japan and subsidiary of SoftBank Corp, has reached a preliminary agreement with messaging app provider Line Corp to forge a business integration alliance, both companies said on Monday.
“The Business Integration will be conducted on an equal basis by ZHD (the resulting firm) and LINE with the aim of forming a business group that can overcome fierce domestic and global competition,” SoftBank Group said in a statement.
The agreement would involve the purchase of shares with acquisition rights from Line – which is a Tokyo-based subsidiary of the South Korean internet search engine Naver Corp, according to SoftBank.
The SoftBank Group owns 45 percent of Z Holdings through its telephone subsidiary SoftBank Corp, while Naver controls 73 percent of Line.
Both the companies will hold an equal amount stake in ZHD, which will legally be a subsidiary of SoftBank.
At a press conference, Z Holdings President Kentaro Kawabe said that with this merger, the two companies aim to become the leading technology and artificial intelligence company in Asia.
The merger is expected to be completed in October 2020, pending the decision of the regulatory authorities.
Line is the most popular messenger app in Japan with around 82 million users and is also available in other Asian nations including Taiwan and Thailand.
Line has been facing difficulties attracting new users and the high development costs have been taking a toll on the company. It recorded losses of 33.9 billion yen (around $310 million) between January to September.
Once it is completed, the agreement will create a combined platform with more than 100 million users of financial services, e-commerce and other areas that could change Japan’s digital landscape.
The negotiations come at a time when SoftBank Group’s investment business is not at its best. The telecom giant’s profit fell by almost 50 percent between April to September due to the devaluation of its investments in the US firm WeWork.
After the announcement of the merger, the shares of Z Holdings and Line at the Tokyo Stock Exchange increased by 1.19 percent and 2.19 percent respectively.