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Friday, June 9, 2023

HYBE and Kakao end hostilities in SM Entertainment battle – Variety

South Korean tech giant cocoa gained the upper hand in the battle for control Hallyu mechanism SM Entertainmentback seashellThe company behind music icon BTS said on Sunday it had withdrawn its takeover offer.

SM is the second largest Korean music talent company, supporting music groups including Super M, Aespa, BoA and Red Velvet, Girls’ Generation, HOT, EXO, Super Junior, SHINee and NCT Dream.

HYBE said on Sunday it would “stop the acquisition process […] After observing signs of overheating in the market due to competition from Kakao and Kakao Entertainment, it said this could “damage shareholder value”.

Kakao and HYBE locked in a An Intensifying and High-Stakes Battle for Control HYBE has acquired nearly 15 percent of SM from K-pop pioneer Lee Soo Man since early February. Lee has become estranged from the company he founded.

SM immediately hit back, planning to issue shares and convertible bonds, which would make Kakao and its subsidiary Kakao Entertainment SM the second-largest shareholder with a 9 percent interest.

That avenue was blocked when Lee seek and obtain a court injunction to prevent the problem.

However, earlier this week, Wealthy Kakao fight back Offer KRW 150,000 per share to existing shareholders, valued at close to US$1 billion Acquired a 35% stake in SM. This handily beat HYBE’s open market bid of 120,000 won for a further 25 percent stake in SM and pushed SM shares to a new high of 147,800 won at Friday’s close.

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 agreed to cooperate on matters related to their platform.”

In its own statement, Kakao said it would continue to buy SM shares until March 26, as planned in the tender offer.

Korean business media also reported that HYBE will no longer propose SM board candidates at its shareholder meeting scheduled for March 30.

The moves appear to have given Kakao management control over SM, with HYBE entering into an unspecified deal with Kakao-controlled SM over a “platform,” or online business. HYBE controls Weverse, a powerful fan platform used by BTS and other bands.

Statements from both companies did not say whether HYBE would retain or sell the 14.8 percent stake in SM it received from Lee. It will not continue to acquire the remaining 3.5% of Lee’s shares as previously announced.

SM’s current management strongly opposes a hostile takeover by its biggest competitor. It has outlined its own restructuring plan, dubbed SM 3.0, focused on establishing multiple production centers, new labels and expanding access to its artists’ intellectual property.

SM issued its own statement on Sunday, welcoming the deal between HYBE and Kakao. “We will accelerate our SM 3.0 strategy and realize our future vision of becoming a fan- and shareholder-centric global entertainment company,” it said.

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