(ATTN: CHANGES lead; UPDATES with more info throughout)
By Kim Han-joo
SEOUL, Nov. 18 (Yonhap) -- Naver Corp., South Korea's No. 1 internet portal, said Monday that its Japanese messaging app provider Line Corp. has reached a basic merger deal with internet portal Yahoo Japan Corp., a move that would create Asia's leading tech company to compete with global behemoths.
Under the agreement, Line and Japanese telecom giant SoftBank Group Corp. -- a holding firm of Z Holdings Corp. that operates Yahoo Japan -- will each hold a 50 percent stake in a new joint venture named Z Holdings, the company said.
Naver holds a 73 percent stake in Line, and SoftBank owns 45 percent of Yahoo's parent company, Z Holdings.
The two sides are scheduled to ink a formal contract next month, officials said.
The move comes as the two firms have separately been making efforts to compete against global leaders, such as U.S.-based Amazon Inc. and China-based Alibaba Group Holdings Ltd.
Naver said the decision for the business integration will bring together the operators of two of Japan's biggest payment apps amid the "cashless" era.
Line is the most popular chat app in Japan with 80 million users, far ahead of global platforms, such as Instagram and Facebook, in Japan. The company posted 207.1 Japanese yen (US$1.9 billion) in sales in 2018.
Yahoo Japan, which has been making efforts to bolter services, such as mobile payments and e-commerce, has 50 million users and generated 954.7 billion yen of revenue last year.
If completed, the merged entity could become Japan's biggest internet platform with chat, search, e-commerce and payment apps with over 100 million users, surpassing e-commerce giant Rakuten Inc.
Market watchers further forecast the new JV to bolster developing artificial intelligence (AI) technology, considered a new growth engine, in the face of Google Inc., Facebook and other global leaders.
"(The deal) is expected to create synergy and increase future growth, bringing Z Holdings to the new tech firm based on AI that could compete against global platform operators," Naver said in a press release.
Last month, Seok Sang-ok, CEO of Naver LABS -- a R&D subsidiary of Naver -- said the company plans to create the "Eurasia AI research belt" by investing in the AI technology.
The heads of Line and Z Holdings are scheduled to hold a press conference in Tokyo later in the day.
Shares of Naver were trading hands 3.46 percent higher at 179,500 won on the Seoul bourse as of 2:00 p.m. The announcement was made before the local market opened.
Bumpy road lies ahead for Samsung, even after heir avoids detention
One month into eased social distancing, S. Korea wrestles with cluster infections, cases with unknown routes
Virus outbreak sheds light on overlooked side of highly touted 'fast' delivery services
Moon's post-corona presidency laden with tough tasks
S. Korea shifts toward new normal of everyday quarantine but wary of 'blind spots'