The SoftBank Group’s subsidiary Z Holdings has announced that after completing a merger with the popular messaging app Line, it will invest $4.7 billion into the venture and hire 5,000 artificial intelligence engineers over the next five years. The merger of the two Japanese companies has been in the works since 2019, but was delayed by issues related to Covid-19.
The main business areas of the company will be communication and social media, electronic and mobile commerce, along with online search and advertising. With the launch of their new services and collaborations with companies such as for online advertising, the joint establishment aims to generate $18.7 billion in revenue and $2 billion in operating profit in the fiscal year 2023.
Softbank Corp. and Naver Corp., the South Korean IT giant and major shareholder of Line, will each contribute 50 percent of capital required for the new intermediate holding company, which owns 65.3 percent of Z Holdings shares. Yahoo Japan and Line have become wholly owned subsidiaries of Z Holdings, which will not be delisted.
The newly merged company will become a technology giant with more than 300 million subscribers using messaging, online news and financial services. The initial merger target date of October 2020 was deferred due to delays in the regulatory approval process caused by the pandemic.
Z Holdings plans to integrate Line Pay and Line’s mobile wallet into PayPay by April of 2022, currently pending regulatory approval. Moreover, the merger will also provide Z Holdings with the opportunity to expand its operations outside of its home market in Japan, and enter three overseas Asian markets Taiwan, Thailand and Indonesia, where Line is still widely used. As a result of the licensing agreement, Z Holdings was generally only able to use the Yahoo brand in Japan.
A successful integration might jeopardize US technology giants Google, Amazon, and Facebook usage in Japan, not to mention the local e-commerce titan Rakuten.