November 26, 2024

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People take taxis using Kakao Mobility's ride-hailing service in Seoul. (Yonhap)

Kakao Mobility, the operator of South Korea’s leading taxi-hailing service Kakao T, seems to be seeking new opportunities in Europe as it faces growing scrutiny here.

According to industry sources on Monday, the company is likely to submit its final bid to acquire a stake of around 80 percent in German mobility service provider FreeNow as early as this week. The exact deal size was not revealed, but sources predict it to amount to some hundreds of millions of dollars.

If the company wins the bid, it will become the largest acquisition of a European tech company by a Korean firm. For Kakao, it will be the company's second overseas purchase deal, following its takeover of a 49 percent stake in British ride-hailing startup Splyt in March.

Kakao’s latest European push comes amid growing regulatory scrutiny over its sprawling businesses at home. Amid its prolonged conflicts with taxi drivers, President Yoon Suk Yeol recently urged a full review of the company’s operation, citing monopoly concerns.

A Kakao Mobility official refused to confirm the firm’s possible bid to acquire the German rival, saying: “Our ultimate goal is going beyond the boundaries of Kakao. We have been actively pursuing ways to turn over a new leaf as a global mobility company.”

“Platform operators are competing head-on to secure massive amounts of data globally, which is crucial for their business expansion. Kakao Mobility, as a foreign company, appears to be expanding into overseas markets by acquiring a local player, rather than tackling regulatory burdens in the earlier stage,” an industry source told The Korea Herald on condition of anonymity.

FreeNow, founded in 2009 in Hamburg, is Europe's largest mobility platform with an 83 percent market share in the region’s taxi-hailing market. The company, backed by German luxury carmakers Mercedes-Benz and BMW, operates in 170 cities across 11 European countries, including Germany, the UK, Spain and Italy.

Industry watchers agree that Europe, the world’s third-largest mobility market, is relatively less competitive compared to the top two markets -- the US and China which are crowded by powerful local rivals.

“The mobility platform business does not require much capital spending or technological investment compared to other sectors. It could be a winnable challenge for Kakao Mobility to go global,” said Hwang Yong-sik, a business administration professor at Sejong University.

Lee Sung-yeop, a professor at Korea University's Graduate School of Management of Technology, also offered a positive outlook, saying “This is an opportunity for Kakao to become the only sizable global taxi platform operator in Europe, based on its successful business models proved at home and Southeast Asia.”

But Lee questioned Kakao’s financial ability to shoulder such a mega-deal, as well as its specific plans for overseas expansion.

In the meantime, the ongoing probe into alleged stock price manipulation at its parent company Kakao is expected to add uncertainty to the acquisition deal, with its founder Kim Beom-su and other top executives being summoned for questioning. Kakao is the largest shareholder of Kakao Mobility with a 57.31 percent stake, while Khaki Holdings, a TPG Group-led consortium, owns a 14.31 percent stake as the second-largest shareholder.

By Jie Ye-eun  (yeeun@heraldcorp.com)