LINE App, Yahoo Japan Plan Merger

Yahoo site operators in Japan and messaging app LINE are looking to merge into a “super app” that would combine retail, finance and a slew of other services, according to reports.

Yahoo Japan is backed by SoftBank, which has a 45 percent stake in the company’s parent, Z Holdings. NAVER, a South Korean company, owns 73 percent of LINE. The two parties are trying to reach an agreement by the end of the month.

If the merge deal is approved and moves forward, it would see the creation of a huge platform with 100 million users throughout all types of services. It would also give Japan one of the biggest platforms in the world — to rival China and the U.S.

One of the proposals involves SoftBank and NAVER setting up a 50-50 deal, which would become the biggest shareholder in Z Holdings. Both Yahoo and LINE would subsequently become wholly owned entities of Z Holdings. The new venture would become a consolidated subsidiary of SoftBank, and Z Holdings would stay listed on the Tokyo Stock Exchange.

Platforms that combine retail and finance are becoming more popular globally, and overtaking companies that specialize in just one of those ventures. China’s Tencent, for example, has more than 1 billion users through its WeChat app, eCommerce and payment platforms, games and streaming services.

In Japan, LINE is the most popular chat app, and has 82 million active users every month, which puts it leagues ahead of Instagram and Facebook in the country. However, it is struggling to attract new users, and doesn’t have the capital to become a super app on its own, with revenue of just ¥200 billion (nearly $1.84 billion). It also saw a loss of ¥33.9 billion in the period from January to September.

The merger would boost the new venture in the digital payments sector, which has recently seen a lot of activity in Japan.