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SM Entertainment confirms support of Kakao’s latest share buying plan

By | Published on Wednesday 8 March 2023

SM Entertainment

The management team at South Korea’s SM Entertainment have, unsurprisingly, welcomed the latest bid by internet firm Kakao to buy a controlling stake in the business. Kakao, they said, respect the “unique tradition and identity” of the K-pop company.

SM management previously agreed a deal with Kakao – which has its own entertainment business and operates the streaming service Melon – which would have seen the former issue new shares to be sold to the latter.

However, SM’s founder and – until recently – biggest shareholder Lee Soo-man opposed that deal and last week successfully blocked the issuing of new SM shares through the Korean courts.

Lee also sold most of his SM shares to rival K-pop powerhouse Hybe, best known as home of BTS, making it clear that – if SM was going to forge an alliance with a competitor – he’d prefer it to be Hybe rather than Kakao.

Hybe’s deal with Lee gave it a 14.8% stake in SM, although Hybe bosses said they were interested in buying shares from other shareholders with the aim of securing a 40% controlling stake in their rival.

However, with its original deal with SM cancelled because of last week’s court ruling, earlier this week Kakao said it was now also interested in buying SM shares with a similar ambition to acquire around 40% of the business. But Kakao is offering a higher price than Hybe.

In a statement about its new bid for SM shares yesterday, Kakao said that it needed to become the largest shareholder in its rival in order to “stably maintain” a partnership that will allow the two companies to better compete in the global entertainment market.

According to Korea JoongAng Daily, Kakao’s statement continued: “Kakao respects SM Entertainment’s unique tradition and identity and will guarantee autonomous management [and] continuation of artist independence in their activities”.

“When SM Entertainment’s global influence in music and artist intellectual property fuses with Kakao Entertainment’s expertise in the intellectual property businesses, we’ll be able to strengthen our global competitiveness by expanding our intellectual property businesses across a variety of sectors as well as in music”, its statement added.

SM’s management quickly confirmed that they supported Kakao’s bid to become the firm’s biggest shareholder. According to CNN, they said that Kakao was their preferred partner because of its “respect for the current management’s efforts to address factors that have hindered SM Entertainment’s growth”.

“Unlike Hybe”, they went on, “which seeks to take control of SM’s board of directors through a hostile takeover, Kakao respects SM’s unique tradition and identity, and will ensure the company’s independent operation, as well as SM artists’ continuous activities”.