Photo/IllutrationThe logos for Yahoo Japan Corp. and Line Corp. (Asahi Shimbun file photo)

  • Photo/Illustraion
  • Photo/Illustraion

A company under the SoftBank umbrella is in merger talks with messaging app operator Line Corp. that could create an IT behemoth capable of taking on such global giants as Google, Amazon and Facebook.

Sources confirmed that the negotiations were being held between Line and Z Holdings Corp., which includes Yahoo Japan Corp. among its group companies.

Z Holdings, SoftBank Corp. and Line all issued statements on the morning of Nov. 14 saying they were not prepared to make a formal announcement about the talks. But all three companies did indicate that negotiations were continuing.

About 80 million people use Line’s free messaging app, while about 50 million use various services provided by Z Holdings, which came into existence in October as a holding company under smartphone operator SoftBank.

A company created by the merger could provide social networking sites, search engines, e-commerce services and online financial services to about 100 million users.

The sources said one proposal involves having SoftBank and Naver Corp. of South Korea, the leading shareholder of Line, each contribute 50 percent of the capital of a new company, which, in turn, would become the leading shareholder of Z Holdings through an infusion of funds.

Z Holdings would then serve as a holding company owning all shares of both Yahoo Japan and Line.

Although the new company would have equal contributions from SoftBank and Naver, it would be considered a part of SoftBank in consolidated financial statements. That means SoftBank would have a greater say over not only the new company but also those under that holding company.

Z Holdings and Line are involved in different Internet services, but both have set up smartphone payment systems. A merger could consolidate those systems and lead to additional services being provided.

The merger talks may have been pushed by recent financial difficulties faced by SoftBank Group Corp., the parent of SoftBank.

Investing in startups had been one of the pillars for the SoftBank Group’s profits. However, the bailing out of one such company led the SoftBank Group to announce an operating loss of 15.5 billion yen ($143 million) for the six-month period ending in September.

The company had recorded operating profits of 2.3 trillion yen for the fiscal year ending in March.

The merger talks with Line may show that the SoftBank Group is shifting its focus to strengthening its own Internet services.