Line is the dominant chat app in Japan and says it has 82 million active monthly users.


Akio Kon/Bloomberg News

TOKYO—Internet portal

Yahoo Japan Corp.

4689 1.20%

and chat app


LN -4.94%

said Monday they have reached a basic agreement to merge in a deal that includes a $3.1 billion buyout of Line Corp.’s minority shareholders.

Under the merger terms, a

SoftBank Group Corp.

9984 1.64%

subsidiary and Line parent

Naver Corp.

035420 2.88%

of South Korea will each hold 50% of a joint-venture company that in turn will control a holding company housing the operations of Yahoo Japan and Line. Media, including The Wall Street Journal, reported last week that the 50-50 arrangement was being studied.

The companies said they aimed to leverage each other’s large user bases to expand their online businesses, which include shopping and payment services as well as advertising-supported content. Line is the dominant chat app in Japan and says it has 82 million active monthly users.

The parties to the deal said they hoped to reach a final agreement next month. They said it would require various clearances from authorities.

As part of the deal, SoftBank Group subsidiary SoftBank Corp. and Naver said they would buy all the shares in Line not already owned by Naver at ¥5,200 ($47.78) a share. Naver owns 72.6% of Line as of Monday. SoftBank Corp. and Naver will pay ¥170 billion ($1.56 billion) each to buy those Line shares, SoftBank said.

They offered a 13.4% premium to Line’s share price before last week’s reports about the merger. In Tokyo trading, Line shares closed Monday up 2.2% at ¥5,150.

The companies said after the merger they would aim to become “one of the world’s leading artificial intelligence technology companies,” applying AI to online marketing, e-commerce and digital payments.

Analysts say the merger could allow Yahoo Japan and Line to compete better against rivals in Japan, including

Alphabet Inc.

’s Google for advertising and Inc.

for online shopping. However, competing outside Japan is likely to be harder because other companies already have dominant positions in major markets.

Write to Takashi Mochizuki at [email protected]

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