Kakao to take over SM as HYBE bows out

The Korea Times

The Korea Times

Finance

Tue, September 26, 2023 | 07:43

Markets

Kakao to take over SM as HYBE bows out

Posted : 2023-03-12 16:29

Updated : 2023-03-13 16:41

Pedestrians walk by the headquarters of SM Entertainment located in eastern Seoul, Sunday. Newsis

By Anna J. Park

The fierce battle between Kakao and HYBE over the management rights of SM Entertainment ended Sunday with HYBE giving up on its quest for its acquisition of SM. The mutual decision was reached three days after the two competing companies entered talks on Friday to solve the heated issue of who would take over SM's management rights.

With Sunday's decision, Kakao will work toward a controlling stake in SM and its management rights, while continuing to seek cooperation with HYBE on its platform business.

"Kakao and Kakao Entertainment respect HYBE's decision to stop the move to acquire SM Entertainment," Kakao said Sunday. "As a partner sharing mutually positive impacts, Kakao and Kakao Entertainment will continue various strategic cooperative relations with HYBE and SM Entertainment to help stoke the global status of K-pop and K-culture," the big tech giant's statement read.

Kakao also vowed to guarantee the independent business operations of SM, aiming to materialize SM's vision 3.0, the entertainment firm's global strategic growth goals for the future.

"By combining SM's global intellectual property (IP) and top-rated production system and Kakao's IT technology and IP value chain business capabilities, we plan to create a new synergy of IP and IT that goes beyond the music business, while strengthening each firm's global competitiveness," Kakao said, adding that it will also start shaping up its business cooperation with HYBE.

With uncertainties surrounding HYBE removed, Kakao and Kakao Entertainment said they will continue with their ongoing tender offer to purchase a 35 percent stake in SM until March 26 as originally scheduled.

Kakao launched the tender offer to purchase SM shares at 150,000 won per share ($113) on March 7, aiming to secure a significant stake in the K-pop entertainment company. Kakao's tender offer price is 25 percent higher than HYBE's tender offer for a stake in SM, which was 120,000 won per share and ended in failure in February. If Kakao succeeds in its tender offer, the big tech giant will hold a 39.91 percent stake in SM Entertainment.

A woman takes a photograph at the headquarters of SM Entertainment in eastern Seoul, Sunday. Newsis

HYBE explained Sunday that the decision to halt the SM acquisition was attributed to the firm's overall assessment that the situation had overheated.

"HYBE assessed that the market situation had overheated due to competition with Kakao and Kakao Entertainment, which could negatively impact HYBE's shareholders' rights," HYBE said on Sunday, highlighting that the firm evaluated that the price required for the acquisition of SM went beyond the proper range.

"The two companies ― HYBE and Kakao ― also reached an agreement to seek cooperation on platform businesses," HYBE added.

Meanwhile, Sunday's announcements did not reveal any future plans about a 15.78 percent stake in SM Entertainment already held by HYBE. Market watchers believe that the stake might be sold to either Kakao or Kakao Entertainment, or HYBE will remain the second largest shareholder of SM for future cooperation.

HYBE acquired a 14.8 percent stake in SM Entertainment in early February from K-pop pioneer founder Lee Soo-man, and then later, acquired an additional 0.98 percent stake in the tender offer.

SM welcomes Kakao-HYBE agreement

SM Entertainment welcomes the agreement between Kakao and HYBE announced on Sunday, vowing to commit to achieving the firm's vision 3.0 strategy for future growth.

"With Sunday's agreement, SM Entertainment will accelerate its vision 3.0 strategy that the firm pledged to shareholders, company members, fans as well as artists. The company will achieve the vision towards a global entertainment company, which centers on fans and shareholders," SM Entertainment said on Sunday.

The K-pop company also vowed to generate synergy between IP and IT with its strategic partner Kakao, aiming to open up the next level of the K-pop industry.

annajpark@koreatimes.co.kr