Z Holdings Announces Yahoo and Line Merger After Third-Quarter Slump; FVE Maintained at JPY 440

On Feb. 2, Z Holdings announced the merger of its main subsidiaries, Yahoo Japan and Line. Due to the economic slowdown, advertising revenue, which has been the main driver of earnings, has slowed down, posting negative year-over-year growth in the December quarter. In anticipation of continued headwinds, Z Holdings is shifting its focus to improving cost-efficiency, rather than pursuing revenue growth. In this challenging environment, we believe that the integration of these two companies makes sense, as it will enable the effective use of internal resources by aligning the overlapping businesses, and will also accelerate the decision-making process. While Yahoo Portal website, Line, and PayPay have strong ecosystems with leading market shares in their respective areas, synergies such as ID collaboration and customer transfer have not been realized over the past two years. We expect the integration to accelerate the development of new services through collaboration among these businesses. Overall, we believe the integration will be well received by the market.