Livedoor sold to S Korean internet portal

One of the most gripping rags-to-riches-to-rags story in modern Japanese history came to an end on Monday when the internet portal Livedoor was bought by a South Korean rival.

The last piece of Livedoor – the portal which at one point had a market capitalisation of more than $7bn before scandal deposed its charismatic founder Takafumi Horie – was sold to South Korea’s top internet portal, NHN Corp, for only Y6.3bn ($67m).

NHN hopes the deal will help it expand its online gaming service and its Naver search engine in Japan. It plans to create more Japanese content using Livedoor’s blog service.

Mr Horie founded Livedoor in 1996 as a 22-year-old college drop-out and expanded through aggressive acquisitions. By 2005, when Mr Horie shocked corporate Japan with an unsolicited bid for the radio broadcaster NBS, Livedoor was one of the most celebrated internet companies in Japan.

But his empire fell apart in January 2006 after prosecutors raided Livedoor’s offices as part of an investigation into suspected accounting fraud and market manipulation. Its stock was delisted and Mr Horie was sentenced to 2½ years in jail for securities fraud. Mr Horie is appealing to Japan’s Supreme Court.

After losing its listing, Livedoor’s holding company LDH sold off most of its assets, leaving only the core internet portal that it sold to NHN on Monday. LDH has fought Livedoor-related lawsuits and distributed hundreds of millions of dollars to its shareholders over the past few years.

NHN is the dominant search engine in South Korea with a 70 per cent market share, but Livedoor is now a minor player in a Japanese internet market that is dominated by Yahoo Japan, Google, and social networks such as Mixi. “We can generate substantial growth in Japan if we can combine Naver’s search service with Livedoor’s blogs. It will boost NHN Japan’s corporate value,” NHN said. NHN expects the deal to close by mid-May.

NHN started testing its search engine in Japan last July and has said it aims to grab at least a 10 per cent share of the Japanese search market within three years. Its search service has about 2.2m users in Japan, NHN said. It also offers online games in Japan, which generates about $100m in annual sales.

The acquisition of Livedoor is NHN’s latest move to expand overseas. NHN offers online games in the US and China. It said it had to look abroad for sustainable growth as the domestic market would “get saturated sooner or later”.

It has struggled to build a strong presence in overseas search markets due to a lack of local language content.