SoftBank's Z Holdings confirms merger talks with Line

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© Reuters. Logo of Line Corp is seen at the company's headquarters in Tokyo© Reuters. Logo of Line Corp is seen at the company’s headquarters in Tokyo

TOKYO (Reuters) – The Softbank-owned operator of search engine Yahoo (NASDAQ:) Japan is in talks to merge with messaging app firm Line, a union that would create a group extending from retail to mobile payments in one of the biggest Japanese tech deals of the year.

Z Holdings (T:), which last month changed its corporate name from Yahoo Japan, said on Thursday discussions were underway with Line Corp (T:) but nothing had been decided. SoftBank Corp (T:), which owns 44% of Z Holdings, also acknowledged the talks.

Sources told Reuters the previous day a deal could see SoftBank Corp and Line’s parent Naver Corp (KS:) form a 50/50 venture that would control Z Holdings, which would in turn operate Line and Yahoo.

The parties were likely to reach a basic agreement by the end of the month, the sources said.

The business daily said Z Holdings would remain listed on the Tokyo Stock Exchange.

Z Holdings has a stock market value of about $17 billion and Line about $10 billion, according to Refinitiv data.

Line said in a statement it was true it is considering ways to improve its corporate value but nothing had been decided as reported in the media.

Line, which last year sold a majority stake in its mobile unit to SoftBank, has reported three consecutive quarters of operating losses as the company tries to jump-start growth.

Z Holdings made a move in September to take control of fashion e-tailer Zozo Inc (T:) in a $3.7 billion deal, as it bulks up against rivals such as Amazon.com (O:).

Dealmaking by SoftBank Corp, controlled by tech conglomerate SoftBank Group Corp (T:), comes despite the weak performance of the technology bets of its parent, which recorded an $8.9 billion operating loss in the second quarter.

The group’s first quarterly loss in 14 years followed a collapse in the value of its investment in office-sharing firm WeWork as investors have turned sceptical about the path to profitability at cash-burning startups.

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