Three of the biggest players in the South Korean music industry, HYBE, Kakao Corp and SM Entertainment, have been embroiled in a corporate battle for control of the latter company for several weeks.
This battle officially ended on Friday March 24 with the news that HYBE was selling its entire stake in SM worth $435 million.
As reported by ReutersHYBE said in a filing on Friday that it plans to offload its entire 15.78% stake in SM for 564 billion South Korean won (about $435 million), after accepting a public offer to purchase of Kakao.
Last month, HYBE acquired A 14.8% stake in SM Entertainment, for approximately US$335 millionthrough the acquisition of shares from Lee Soo-man, former founder of SM Entertainment.
The company then made its public intention to get a supplement 25.2% shares of SM Entertainment – which would have brought HYBE’s total stake to 40% – via a takeover bid to minority shareholders of SM.
If successful, the move would have seen HYBE spend ≈$565 million on SM shares.
HYBE’s buyout plan failed, however, only managing to acquire a additional 0.98% stake in SM Entertainment, increasing its stake in 15.78% after buying it 14.8% stake in February.
Kakao / Kakao Entertainment then launched its own takeover bid for SM shareholders at a higher price per share than HYBE’s offer. Kakao seeks to acquire up to 35% from SM Entertainment for approx. US$960 million through the process.
Kakao had already reached an agreement to buy 9.05% of SM in February, through the purchase of newly issued bonds and shares. However, Lee Soo-man subsequently successfully blocked this takeover attempt in a Seoul court via an injunction.
According to reports in Korea-based media, Kakao’s latest company is expected to
HYBE’s attempt to buy a 40% stake in SM has consistently been met with strong resistance from The management of SM and on March 12, the music giant officially ended its attempted takeover of SM Entertainment.
HYBE said in a statement at the time that it was suspending its takeover bid following discussions with technology company Kakao – its competitor in the SM takeover process.
According to the statement, “HYBE made this decision after observing that the market was showing signs of overheating due to competition with Kakao and Kakao Entertainment.”
HYBE added that it had “also considered the potential negative impact on HYBE’s shareholder value”.
HYBE’s statement continued, “HYBE acquired the shares of former Chief Producer Lee Soo-man and made the tender offer based on a fair acquisition price range, taking into account the long-term value of SM and any costs that may arise in the post-merger integration process.However, HYBE determined that the acquisition price of SM exceeded the fair acquisition price range while the competition with Kakao and Kakao Entertainment was intensifying.
This news comes as HYBE, SM Entertainment, and Kakao individually seek to expand in the United States through acquisitions or partnerships.
As reported by ReutersPresident of HYBE, Bang Si-hyuk said during a press conference two weeks ago that the company “will announce a substantial number of acquisitions and investments during this year as part of our efforts to expand our presence in the United States”. He added that the company is interested in “leading” companies in the booming Latin music business.
He also reportedly said he was “personally pleased” with a new fan platform deal with Kakao Entertainment.
(HYBE previously acquired Ithaca Holdings from Scooter Braun for more than $1 billion in 2021, while HYBE America (now led by Braun) announced last month that it was buying Atlanta-born Quality Control for $1 billion. approximately $300 million.).
Kakao, meanwhile, recently entered into a new partnership with Sony Music’s Columbia Records in the United States through its Kakao Entertainment America distribution network and, according to a press release, “elevates its position in the global market.”
Additionally, SM Entertainment revealed through a recent investor presentation that it plans to acquire a music company in the United States to accelerate its global expansion.
SM says he is “currently looking at suitable businesses for SM’s genre spectrum” in the United States and looking to expand into hip-hop and R&B.
The company says it plans to spend 200 billion South Korean won on this investment strategy (see below), which converts at current exchange rates to around 150 million US dollars.The music industry around the world
