Wemade Control Sale Delayed... Is Chinese Government Approval Taking Longer?

Largest shareholder change postponed to December 30

Delay in meeting conditions for closing... "Deal is not falling apart"

Initially expected to be completed by the end of this month, the sale of Wemade founder and Chairman Park Kwanho's stake and managerial control has been postponed by two months. As approval procedures with Chinese gaming company Kingnet are taking longer than expected, uncertainty surrounding the sale of control of Wemade is growing.

According to the Financial Supervisory Service's electronic disclosure system on October 15, Wemade postponed the scheduled date for payment of the remaining balance and the change of its largest shareholder, originally set for October 30, to December 30, two months later. The reason for the schedule adjustment was "a delay in satisfying the conditions precedent to closing under the contract."

The gaming industry believes that payment of the balance has been delayed because the Chinese government's approval for overseas investment is taking longer than expected. Kingnet must obtain approval for overseas direct investment (ODI) and foreign currency remittances from authorities including China's National Development and Reform Commission and Ministry of Commerce. The process can take one to three months at the earliest, but may take several months or longer for large-scale investments. Kingnet previously stated that there was uncertainty over whether and when the relevant procedures would be completed.

In June, a consortium of Chinese investors, including Hong Kong-based investment firm NeoPulse and Kingnet, completed payment of a 10% deposit worth 92 billion won to Chairman Park under the agreement to acquire Wemade. The remaining 90% payment, which has now been postponed, amounts to 828 billion won. Once the merger and acquisition (M&A) is completed, NeoPulse will acquire a 39.33% stake from Chairman Park and become Wemade's new largest shareholder, with a 40.25% stake. Kingnet, a Chinese gaming company, is a major investor in NeoPulse. The transfer of control is expected to be finalized at an extraordinary general meeting of shareholders convened after the remaining balance is paid.

Market uncertainty is growing over whether the deal will clear scrutiny by Chinese authorities, as it involves a large amount of Chinese capital flowing overseas. In the past, domestic investments by Chinese capital faced setbacks, including during the THAAD (Terminal High Altitude Area Defense) dispute. Several content companies, including Chorokbaem Media and Signal Entertainment, which had attracted significant investment from local investors such as China's DMG Group, saw follow-on investments delayed indefinitely or agreements fall through after being caught up in Chinese restrictions on overseas investment and holds on remittances.

However, with a substantial deposit already paid, the possibility of the deal collapsing entirely appears low, even if it takes some time to complete the M&A. A Wemade official said, "As far as we know, the parties' intention to proceed with the contract has not changed," ruling out such concerns. The official added, "If the remaining conditions precedent are met early, the closing date could be moved forward again." Kingnet, in particular, had been engaged in a 10-year legal dispute with Wemade over "The Legend of Mir 2," which was settled in April this year after Kingnet paid a settlement. Through this acquisition, Kingnet plans to expand opportunities in global and Chinese markets, including in publishing and licensing of key intellectual property (IP).

Meanwhile, Wemade employees are concerned about control of the company passing to Chinese investors. Wemade's labor union announced its official launch last month and has begun actively preparing for the new management structure, including by seeking employment stability. In future collective bargaining, it plans to demand that management: ▲reject restructuring and layoffs following the change of the largest shareholder and organizational restructuring; ▲prevent unilateral deterioration of working conditions; ▲improve the performance bonus payment system; ▲make prior consultation mandatory when changing the direction of major businesses; and ▲confirm fair employment succession and the continued existence of major business divisions, including the WEMIX business.

This content was produced with the assistance of AI translation services.