LOOK: HYBE Walks Away From Takeover Bid For SM Entertainment
The company behind global K-Pop superstars BTS has acquired shares from the “Godfather of K-Pop” himself, Lee Soo-man—which took the industry and its fans by surprise.
HYBE, the entertainment company that is home to popular K-Pop groups such as BTS and Seventeen, has dropped plans to take over rival company SM Entertainment. SM Entertainment is the company behind K-Pop acts such as EXO, Super Junior, Girls’ Generation, and Red Velvet.
According to a report by CNN, HYBE—the company led by founder and chairman Bang Si-hyuk—says that the decision was made after “after observing that the market has been showing signs of overheating due to competition with both Kakao and Kakao Entertainment.”
HYBE’s statement adds that their acquisition price for SM Entertainment “exceeded the fair acquisition price range, as the competition with both Kakao and Kakao Entertainment intensified.”
The CNN report likewise notes that HYBE still owns 15.8% of SM Entertainment. The 14.8% stake purchased by HYBE belonged to the founder of SM Entertainment, Lee Soo-man. Prior to the acquisition, Lee Soo-man held an 18.46% share in the company, according to Korea JoongAng Daily. The rest of HYBE’s shares is derived from a tender offer—made after acquiring Lee Soo-man’s shares.
Kakao, SM Entertainment React
Reuters reports that both Kakao and SM Entertainment expressed that they welcomed HYBE’s decision to no longer push through with its takeover bid.
SM entertainment previously declared its plans to issue shares as well as convertible bonds that “would have made Kakao and its subsidiary Kakao Entertainment SM’s second-largest shareholder, with a 9% interest,” according to Variety. However, this did not push through as Lee Soo-man obtained a court injunction.
Kakao then went on to offer ₩150,000 per share (approximately PHP 6,303 per share) to existing shareholders, which is greater than HYBE’s previous offer of ₩120,000 per share (approximately PHP 5,042). The tech giant—per CNN—was aiming to buy up to 35% of SM Entertainment.
“Kakao and Kakao Entertainment will continue its tender offer bid until the 26th to secure a further stake and work on the details of business cooperation between HYBE and SM,” Kakao said in a statement, according to Reuters.
SM Entertainment Vehemently Opposed HYBE Takeover
It should be noted that HYBE’s takeover plans were vehemently opposed by SM Entertainment, including co-CEOs Lee Sung-su and Tak Young-jun. In fact, a statement was previously released by the company, saying, “We oppose any hostile M&A from outside forces, including HYBE.”
“We oppose the ownership of the company by any single shareholder or force, and we will try our best to establish a sound and transparent management structure and protect the shareholders’ rights to the fullest,” the statement added.
A video has likewise been uploaded on SM Entertainment’s official YouTube channel with the title “The reason why SM is against HYBE’s hostile takeover.” Said video features the company’s chief financial officer, Cheol Hyuk-jang, as he explains why the company is opposing the deal.
And that is because the deal between Lee Soo-man and HYBE will only create a monopoly and reduce SM Entertainment’s stock price.
What’s Next for SM Entertainment and HYBE
HYBE’s decision to walk away from its takeover bid for SM Entertainment paves the way for Kakao to continue its own effort to take control of the famed entertainment agency. With HYBE no longer blocking the possibility of having control of SM Entertainment, Kakao is now on its way to expanding the content and entertainment side of their business.
As for HYBE, the Bang Si-hyuk-led company has already turned its attention to other business endeavors. According to a separate report by Reuters, the company is set to announce a number of acquisitions and deals that are geared towards expanding its presence in the United States.
It should be noted that HYBE subsidiary HYBE America—led by CEO Scooter Braun—has a U.S. portfolio that includes SB Projects, which is home to the likes of Justin Bieber, Ariana Grande, and the Kid Laroi, according to Variety. Big Machine Label Group, whose artists include Tim McGraw, Rascal Flatts, and Sheryl Crow, is also part of the portfolio.