Kakao becomes majority shareholder of K-pop agency SM Entertainment
March 28, 2023
South Korean internet company Kakao has become the majority shareholder of K-pop agency SM Entertainment, with a controlling stake of 39.9%.
The purchase was made through a tender offer for approximately $963 million, a transaction that beat out rival entertainment company HYBE, home to BTS, NewJeans and other K-pop artists.
During a shareholders meeting on Tuesday, Kakao CEO Hong Eun-taek confirmed the acquisition and expressed that SM’s intellectual property and Kakao’s technological expertise would help grow both companies.
“After the swift and amicable completion of the acquisition, we will form the business cooperation plans between Kakao, Kakao Entertainment and SM Entertainment, and share them with our investors,” he said.
HYBE was hoping to net $87 million for their SM Entertainment shares, a 25% return on their investment from a month ago.
However, shares in SM closed at 94,300 won (approximately $73) on Tuesday, leading to a loss of $3.23 million. The company was left with an 8.81% stake in SM after the sale.
SM has made headlines as of late because of conflicts between its management and ousted founder Lee Soo-man over the percentage of the company that should be sold to Kakao or HYBE.
Lee sold the majority of his shares to HYBE for $334.5 million in February, which gave HYBE a 14.8% ownership stake in the company. Their plan was to acquire the remaining 3% stake held by Lee and subsequently make an open offer to other shareholders, with the goal of purchasing an additional 15%.
SM Entertainment management opposed the acquisition plans, which it considered a “hostile takeover.” The co-CEOs expressed their concerns through a series of videos uploaded on the company’s YouTube channel and their personal platforms. Chris Lee, who is a co-CEO and the nephew of Lee Soo-man, accused his uncle of being involved in offshore tax evasion and causing delays in projects for SM artists.
After a South Korean court blocked Kakao from acquiring a 9.05% stake in SM after the company attempted to issue new shares, Kakao offered to purchase SM shareholders’ shares for $115 per share, which was substantially higher than HYBE’s offer of $92 per share.
Following Kakao’s acquisition on Tuesday, SM Entertainment stock rose 3.5%.
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