TOKYO -- The operators of Yahoo sites in Japan and the Line chat app jointly announced on Monday that they have reached a basic agreement on a merger. The companies aim to sign a finalized agreement in December.
SoftBank Group and South Korean internet giant Naver will form a joint holding company, each investing 50%, according to an announcement by Z Holdings, the Yahoo parent and SoftBank Group member, as well as Line.
Z Holdings and Line will become subsidiaries of the new venture company.
Z Holdings and Line plan to integrate their businesses by October 2020. After the integration, the resulting company is expected to be Japan's largest internet player in revenue.
The four U.S. IT giants collectively called GAFA -- Google, Apple, Facebook and Amazon.com -- and China's e-commerce giant Alibaba Group have a dominant presence in the internet market.
Z Holdings and Line will aim to strengthen their presence in the online market by expanding their scale through their business integration at a time when they are under pressure to increase investment in new technologies such as artificial intelligence.
The two Japanese companies said on Monday that they would "consolidate their management resources and aim to become an AI tech company that leads the world from Japan and Asia."
After Z Holdings and Line sign a final contract on their business integration in December, their respective parent companies -- SoftBank and major South Korean internet company Naver -- intend to jointly launch a tender offer for Line and invest 340 billion yen ($3.1 billion) to take Line private.
As a result, Line's shares will be delisted. Line's ordinary shareholders will receive 5,200 yen per share.
Z Holdings and Line had combined fiscal 2018 sales of approximately 1.16 trillion yen, topping those of Japanese shopping site operator Rakuten, which had sales of 1.1 trillion yen.