A Holdings Corp, a holding company owned equally by Japan’s SoftBank Corp and South Korea’s Naver Corp, plans to sell down its stake via LY Corp’s ¥150 billion (US$1 billion) tender.

The move is designed to raise the proportion of LY’s tradable shares to 35% or above, a requirement to remain listed in the Tokyo Stock Exchange’s Prime Section. LY would buy back up to 5.13% of its outstanding shares from A Holdings at ¥388 per share, SoftBank said in a statement Friday.

The tender comes as the capital structure of the operator of Japan’s biggest messaging app Line threatens to become a diplomatic flash point between Japan and South Korea.

For the June quarter, LY reported a better-than-expected 21.7% rise in adjusted earnings before interest, taxes, depreciation and amortization. Stronger revenue from payment service app PayPay Corp, as well as from commerce operations on shopping platforms at Zozo Inc, Askul Corp and Yahoo Japan helped, it said.

Japan’s Ministry of Internal Affairs and Communications has said the 50-50 control of LY by both SoftBank and Naver leaves the messaging app vulnerable to cyberattacks. It has called for a change in ownership that would give LY the independence to demand stronger safeguards of Naver, before Japanese regulators appeared to soften their stance.

Data leaks stemming from a breach of Naver’s cloud service last year prompted scrutiny by Japanese regulators, who are in turn under pressure from the US government to strengthen the country’s cyber security. Naver’s cloud service helps manage user information for LY’s Line messaging app, which is popular in Japan and Taiwan.

  - Bloomberg