Naver set to acquire Upbit operator Dunamu through equity swap

Naver, the South Korean internet giant, is set to officially confirm its plan to acquire Upbit’s parent company Dunamu at next week’s board meeting. Dunamu will also hold a board meeting on November 26 to finalize the details.

According to reports, Naver plans to use its fintech subsidiary, Naver Financial, for a full equity swap to acquire Dunamu, the operator of Upbit, Korea’s largest crypto exchange. 

In practice, a stock swap allows two companies to exchange shares instead of cash, creating a parent-subsidiary type governance structure. Ultimately, the move is seen as a way for Naver to cement its entry into digital finance and crypto markets.

Dunamu to grab the largest shareholder

After the two companies confirm the plan at their respective board meetings next week, they must get approval at a shareholders’ meeting to officially start integration procedures.

Industry sources estimate the share-swap ratio between Naver and Dunamu to fall in the range of 1 to 3 or 1 to 4.  In other words, the stock exchange ratio is at the level of about 15 trillion won in Dunamu and 5 trillion won in Naver Financial, which have become the mainstream in the market since last month.

Once the acquisition is finalized, Song Chi-hyung, chairman of Dunamu, will become the largest shareholder by securing about 28% of the integrated corporation. Naver (70% of Naver Financial), the previous largest shareholder, will be diluted to 17%, falling to the second largest shareholder.

Mirae Asset Securities, Naver Financial’s second-largest shareholder (holding a 30% stake), agrees to the merger itself but expresses regret over the valuation calculation.

“It is conservative to evaluate Naver Financial at 5 trillion won when Kakao Pay’s market cap is around 7 trillion won,” a high-ranking Mirae Asset official said. “On the other hand, Dunamoo has a structure in which Naver Chairman Lee Hae-jin has made a lot of concessions as the merger ratio has been calculated at a time when its current value is at a high point.”

Additionally, some in the industry have noted that the merger of the two companies could clash with the financial authorities’ separation of finance and virtual assets regulation. However, as the authorities are said to have determined that the merger does not violate the separation rule, the merger process is reportedly moving ahead at a brisk pace.

As reported by Cryptopolitan, Naver Financial processes annual payment volumes worth 80 trillion Korean won ($58b). In contrast, pairing that scale with Dunamu’s Upbit platform, ranked the No. 1 exchange in Korea and No. 4 globally, is expected to create one of the strongest alliances yet between South Korea’s tech and crypto sectors.

Dunamu and Naver plan to launch a won-backed stablecoin project

The two firms are expected to launch a won-backed stablecoin project, along with other digital finance initiatives. They plan to use the deal as a springboard for global expansion. 

Domestically, for years, Upbit has enjoyed a dominant position in South Korea, holding above 80% of market share in some months since 2022. That dominance has triggered criticism from lawmakers, who argue that Dunamu’s grip on the exchange market risks creating a monopoly.

More recently, market dynamics have undergone significant shifts. At the end of Q3, Bithumb’s domestic share climbed to 46%. Additionally, Bithumb formed a partnership with World Liberty Financial, a crypto venture associated with US President Donald Trump. Upbit held 50.6%. As a result, competition has tightened. This raises the stakes for Naver as it seeks control of Dunamu.

However, crypto trading in South Korea is heavily restricted to South Korean citizens. The deal underscores a global trend of internet and fintech giants steadily colonising crypto rails to expand their businesses.

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