South Korean messaging app Kakao Corp has agreed to acquire Daum Communications, an internet company, in a stock deal valued $3.3 billion. The deal ended a possible IPO process with a backdoor listing.

The deal will give Kakao more challenges to the largest internet portal provider in the country, Naver Corp. The later is also the owner of dominant messaging app in Japan, Line.

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Hyundai Securities analyst Kim Mi-song said that the deal to acquire Daum would allow Kakao to expand its business arms in South Korea and abroad. Meanwhile, Daum would have a new product to boost its growth, Kim added.

Kakao Corp originally planned an IPO to be launched in 2015.

The acquisition deal between Kakao Corp and Daum was formed after an outbreak of deals has been increasing the stakes in the tech industry this year. Facebook Inc bought WhatsApp, a mobile messaging app, for $19 billion while Japan’s Rakuten Inc. acquired Viber in a deal valued $900 million.

Kakao Corp Co-Chief Executive Lee Sir-goo said during a press conference that the company has agreed to impose limits on natural growth. He also added that the move followed after worries of overseas rivals have been expanding rapidly. Furthermore, he said that Kakao Corp felt that it would fall behind overseas expansions had it not agreed on the acquisition deal.

Daum Communications would issue a total of 43 million new shares based on the last trading price of KRW78100 to Kakao Corp following the acquisition deal. Duam did not reveal information regarding the value of the new shares. The internet portal provider will issue both common and preferred stock.

Kakao Corp will hold around 60 percent in Daum. The shareholders of the messaging app included Chinese Internet firm, Tencent Holdings Ltd. The new company will also have two chief executives including Kakao’s Lee Sir-goo and Choi Sae-hoon from Daum.

TagsKakao Corp, Daum Communications, Tencent Holdings, Naver Corp