Why Netmarble made bid for Coway after BTS

South Korean game developer Netmarble was selected as the preferred bidder to buy Woongjin Coway. PHOTO: Reuters

South Korean game developer Netmarble plans to acquire water purifier rental firm Woongjin Coway. In times of crisis, Netmarble has been relying on mergers and acquisition to expand its business. Now, it seeks to diversify its revenue stream by entering non-game business while critics argue that there is hardly any synergy to expect.

◇ Netmarble's M&As and Bang's decision

After the board meeting on Monday, Woongjin decided to designate Netmarble as the preferred bidder for a stake in its Coway shares. Netmarble offered to purchase a 25.08% stake in Woongjin Coway for 1.8 trillion won ($1.5 billion).

Behind the decision stands Bang Jun-hyuk, the chairman who built the foundations for Netmarble's growth by engaging in aggressive M&As. Entering the game industry in 2000, he founded Netmarble after acquiring IPopSoft, a game company in which he served as a non-executive director. In 2004, he sold Netmarble to CJ Corp to secure its stable growth.

Bang stepped up again in 2011 to save Netmarble. By acquiring promising indie game developers, he managed to establish Netmarble as South Korea’s biggest mobile gaming company. In 2015, Netmarble entered strategic partnership with NCSOFT. The decision led to Netmarble's greatest hit, ‘Lineage 2: Revolution’ in 2016.

Right before going public in 2017, Bang spent over 1 trillion won ($840 million) to acquire foreign game developers such as Kabam and Jam City. This was done in the hopes of extending Netmarble’s business overseas and raising its value. Netmarble also attempted to acquire its rival Nexon earlier this year.

Acquisition of Coway is not the first instance that Bang took an interest in non-gaming business. Last year, Netmarble bought a 25.71% stake in Big Hit Entertainment for $170 million. Big Hit manages BTS, a boy band popular worldwide. Back then, Bang was hoping for a breakthrough as profits declined and competition increased within the game industry. This time, he is taking his bet on Korea's largest rental services firm.

◇ Stable cash flow and subscription model


Netmarble explained that by acquiring Coway, it plans to combine game and rental business, providing smart home services based on subscription model. Coway has 35% of the Korean water·air purifiers, bidets and bed mattresses rental service market. It has more than 7 million subscriptions and hires more than 20,000 door-to-door salesmen. Netmarble plans to make products based on its artificial intelligence, big data, and cloud technology and sell them to Coway’s customers.

However, investors and analysts are raising doubts about the synergy between the two businesses. Unlike the home rental services targeting households, gaming businesses target individuals, typically males in their 20's and 30's.

Experts argue that Netmarble plans to use Coway as a cash cow. Coway's revenue for the last year was $2.2 billion and its operating profit $421 million. Netmarble’s operating profit for the last year was $203 million. According to sources, Netmarble expects that relying on game business alone will soon reach its growth limits, despite steady growth in its revenue. /Kang, Misun. Nam, Soohyun

*The original version of this article has been published on Oct. 14, 2019.

원문보기☞ '방탄' 투자했던 방준혁…'코웨이' 인수는 왜?