KPops Corporate Clash: HYBEs Battle For SM Entertainment Gets Rougher

KPops Corporate Clash: HYBEs Battle For SM Entertainment Gets Rougher

HYBE Corp., the talent firm behind K-pop sensation BTS, has launched a campaign to woo shareholders of rival Korean talent empire SM Entertainment, in a bid to become the sole largest shareholder.

In a set of letters and videos released Thursday, HYBE said it had launched a campaign website detailing its business strategy and how to prioritize SM shareholders.

More than variants

The document directly criticizes SM's current management and also attacks Korean entertainment technology giant Kakao, which recently formed an alliance with SM.

“The HYBE campaign aims to protect shareholder value from the inappropriate actions of current SM management. This is about ending one-sided partnership deals with Kakao, unrealistic and unsubstantiated financial projections, and emotional messages that cloud public opinion, all initiated by current SM management,” HYBE said.

A week ago, HYBE said it had overpaid its 14.8% stake in SM and hoped to finalize the legal aspects of the deal by March 6, ahead of schedule.

The company bought the majority of the 18.7% of SM shares held by SM founder Lee Soo Man. The deal is valued at $336 million (KRW 423 billion), valuing SM Entertainment at $2.27 trillion. Lee has the option to sell his remaining shares to HYBE within one month at a specified price.

HYBE has also offered to buy 25% of the company's shares from other shareholders.

Controversy erupted on multiple fronts shortly after HYBE announced a stock purchase deal with Lee in early February. This included revelations about other Lee-controlled companies' financial and business ties to SM Entertainment and vocal protests by SM Entertainment employees against what they saw as a takeover by HYBE.

See also  AMC Entertainment Acquires 13Screen Former ArcLight Cinema In Boston

In February, about 208 SM employees signed an open letter calling Lee's activities "unlawful tax evasion."
SM staff also scoffed at HYBE's suggestions that the two groups could act together or that HYBE would be the biggest supporter of the new SM 3.0 strategic plan. They argue that HYBE will always favor affiliates and record labels that have a higher share of ownership.

“HYBE and SM are the two biggest competitors in the industry,” SM said in a letter Wednesday.

SM currently represents K-pop groups such as Super M, Aespa, BoA and Red Velvet.

HYBE represented BTS and Tomorrow X Together under their Big Hit Music operation, Enhypen under their joint venture Befit Lab with CJ ENM, Le Sserafim under Source Music, and found new success with the girl group upstarts NewJeans.

The feud between HYBE, the late Lee and current SM management is further complicated by the arrival of Kakao, a $22 billion internet conglomerate with interests ranging from social media and messaging to games and video production. , television and webtoons.

In early February, it was revealed that Kakao had acquired a 9.05% stake in SM, making it the second largest shareholder behind HYBE.

It was later revealed that Kakao, its subsidiary Kakao Entertainment, and SM had signed an agreement that would have given Kakao exclusive rights to distribute albums and music from SM artists. At the corporate level, the deal gives Kakao and Kakao Entertainment the privilege to purchase new shares in SM.

"The business partnership agreement includes the vision and future direction shared by Kakao, Kakao Entertainment and SM Entertainment," Kakao Entertainment CEO Kim Sung-soo said in a statement in February. “We plan to consult with individual companies to develop a favorable structure for all companies and to sign agreements based on fair contractual conditions.

See also  MakeMake Entertainment Announces 2023 Inaugural Class Of Residents

HYBE denied a hostile takeover. Cocoa, however, avoids using the term "poison pill tactic".

But Kim made little effort to hide the effect of the deal on delaying or stopping SM's potential takeover by HYBE. He said the preference clause was "part of the anti-dilution provisions for minority shareholders to avoid the loss of the value of their investment", denying that such a move would reduce SM's profits.

On Wednesday, the current management of SM launched its campaign to retain the support of small shareholders. He sent a letter to shareholders, promising them a dividend of KRW 1,200 ($0.9 per share) and asking them to reject Lee's bid for the company. SM's shareholders' meeting is scheduled for March 31.

HYBE has named two of its senior executives as future members of the SM Board of Directors: Jung Jinsoo, HYBE's Chief Legal Officer, and Lee Jaesang, President of HYBE America.

HYBE asked Kakao to clarify whether he intended to participate in SM's day-to-day operations, criticizing the original stock purchase clause as inappropriate for a public company.

the best variety

Sign up for the variety newsletter. Follow us on Facebook, Twitter and Instagram for the latest news.

Click here to read the full article.

Leave a Comment