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moveThe South Korean talent management firm behind BTS said on Wednesday it had paid to buy a 14.8% stake in the rival SM Entertainment It expects to close the deal by March 6, ahead of a previously announced timeline.
company Announced earlier this month that it would acquire the majority of founder Lee Soo Man’s 18.5% stake in SM Entertainmentbecoming the largest shareholder of HYBE SM Entertainment.
The deal was priced at $336 million (42.3 billion won), giving SM Entertainment an implied valuation of $2.27 billion.
Lee reserves the option to sell its remaining shares to HYBE at a specified price within one month. HYBE has also offered to buy a further 25% of the company from other shareholders.
Nonetheless, HYBE said its stock purchase did not constitute a hostile takeover. HYBE CEO Park Ji-won issued a lengthy statement on Wednesday in an attempt to appease SM’s stakeholders, fans, and staff.
“HYBE fully respects the direction set in the SM 3.0 growth strategy and the value and vision created by SM employees and artists,” Park’s statement said. “We hope to enjoy more success with SM’s fans, employees, artists and shareholders in the future. If we work side by side, we can continue to lead Hallyuglobal phenomenon. “
The reference to SM 3.0 is the recently announced plan to establish a multi-production and labeling system and use its artists’ intellectual property for merchandise, games and other non-music products.
About two years ago, Lee announced his intention to sell his stake. Bidders were once thought to include South Korean tech giants Naver and Kakao, but reports last year said the list had been whittled down to a single bidder – South Korean entertainment giant CJ ENM.
Controversy on multiple fronts erupted after HYBE announced its deal with Lee. These include financial and business relationships with SM Entertainment maintained by other companies controlled by Lee, as well as strong objections from SM Entertainment employees.
Last week, some 208 employees signed an open letter outlining Lee’s activities.
“As soon as former chief producer Lee Soo-man was in danger of being exposed for illegal tax evasion, he sold his shares to a rival company he had spoken ill of and ran away.
[We] SM members were completely used by former chief producer Lee Soo Man to engage in illegal activities such as fraud and tax evasion for personal gain. Even before we start the SM 3.0 project, we must not again be exploited by HYBE’s illegal and expedient tactics,” the letter read.
Park’s latest letter does not address concerns about Lee and his contract. However, in an earlier memo last week, he said: “What we have heard over the past few days has only involved the past involving Lee and SM’s current management and will not affect the future being transparently led by Hybe and SM. SM.
He also said that HYBE-backed SM Entertainment has no obligation to maintain a future business relationship with Lee.
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