Aespa (Photo: MAMA)
Korean tech giant Kakao has gained the upper hand in the battle for control of K-pop agency SM Entertainment, after HYBE Corp., the company behind music idols BTS, said on Sunday it had canceled its takeover bid.
SM is Korea’s second-largest musical talent company and is behind musical groups such as Super M, Aespa, BoA and Red Velvet, Girls’ Generation, HOT, EXO, Super Junior, SHINee and NCT Dream.
HYBE said on Sunday that it would “interrupt the acquisition process […] after observing that the market was showing signs of overheating due to competition with Kakao and Kakao Entertainment,” which he said could “harm shareholder value.”
Kakao and HYBE had been locked in an increasingly bitter, high-stakes battle for control of SM since early February, when HYBE purchased a nearly 15% stake in SM from K-pop pioneer Lee Soo-man. . Lee is estranged from the company he founded.
SM immediately retaliated with a proposed stock and convertible bond issue that would have made Kakao and its subsidiary Kakao Entertainment SM the second largest shareholder of SM, with a 9% stake.
This avenue was blocked when Lee sought and obtained a court injunction preventing the issue.
But, earlier this week, deep-pocketed Kakao retaliated with an offer of KRW 150,000 per share to existing shareholders, worth nearly $1 billion for a 35% stake in SM. This easily exceeded HYBE’s open market offer of 120,000 KRW to buy an additional 25% of SM’s shares and drove SM’s share price to a new high of 147,800 KRW at the close of trading. stock market Friday.
HYBE said on Sunday that it had “discussed the matter with Kakao and reached an agreement to suspend the process of acquiring SM’s management rights. At the same time, the two companies have agreed to cooperate on issues related to their platforms.
In his own statement, Kakao said he would continue to buy SM shares until March 26, as planned under his tender offer.
Korean business media further report that HYBE will no longer propose any nominees for SM’s board of directors at a shareholders’ meeting scheduled for March 30.
The moves appear to give Kakao management control of SM, leaving HYBE with an unspecified agreement to cooperate with a Kakao-controlled SM in “platforms” or online business. HYBE controls Weverse, the powerful fan platform used by BTS and other groups.
Neither of the company’s statements indicated whether HYBE would retain or sell the 14.8% stake in SM that had been obtained from Lee. Nor will it continue, as previously announced, with the purchase of Lee’s remaining 3.5% stake.
SM’s current management had vigorously opposed what it saw as a hostile takeover by its biggest rival. It had already presented its own restructuring plans, called SM 3.0, centered on the creation of several production centers, new labels and an expanded use of the intellectual property rights of its artists.
SM released its own statement on Sunday welcoming the agreement between HYBE and Kakao. “We will rapidly push SM 3.0 strategies and realize our future vision of becoming a fan- and shareholder-centric global entertainment company,” he said.