Hybe to Sell SM Entertainment Stake After Losing to Kakao in K-Pop Bid Battle
Hybe Corp., the talent powerhouse behind K-pop sensation BTS, said on Friday that it will sell its share stake in agency rival SM Entertainment. The move would finalize Hybe’s admission of defeat in a dramatic takeover battle in which it was out-gunned by Korean tech leader Kakao Corp.
Hybe initially bought a 14.8% stake in SM in February from SM’s founder and K-pop pioneer Lee Soo-man. Hybe expected to be able to buy the remaining 3% tranche held by Lee according to agreed conditions and then launched an open offer to other shareholders to buy a further 15%.
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But SM’s management opposed Hybe’s quasi-takeover and harnessed Kakao and its subsidiary Kakao Entertainment with a range of measures. These included a content distribution deal and the sale of newly issued shares and bonds to the Kakao pair.
While a court ruled against SM creating new shares simply for the purpose of defeating a takeover bid, seemingly handing the initiative to Hybe and Lee, Kakao hit back with a significantly richer offer to all shareholders for up to 35% of SM’s currently existing equity. On March 12, Hybe admitted that its tender was insufficient and withdrew it.
In Friday’s regulatory filing, Hybe made it clear that it will now accept Kakao’s tender offer and sell its 3.75 million shares in SM, representing a 15.8% stake, for $437 million (KRW564 billion).
Korean business media report that it is unlikely that all the shares being sold will go to Kakao, as that would take Kakao beyond the 35% sought in its offer. Excess shares would likely have to be sold via the stock market.
A three-party deal hammered out before Hybe’s public climb-down, saw Kakao gain management control of SM. At the same time, however, Hybe secured an agreement that SM would cooperate with Hybe’s powerful online fandom business.
On Thursday, Kakao underlined its status as a K-pop talent powerhouse when Kakao Entertainment America announced a deal with Columbia Records to jointly manage K-pop girl group IVE. Kakao Entertainment is already owner of Melon, Korea’s leading music streamer.
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