On Friday, HYBE, the manager of South Korean boy band BTS, announced a deal to buy a 14.8% stake in rival SM Entertainment from the company’s founder. This will make the “godfather of K-pop” and BTS’s management fight even harder in the business world.
HYBE also said that it would make a tender offer for SM shares held by minority shareholders. It wanted to buy up to 25% of the rival agency, which caused SM shares to hit record highs of up to 16%.
The news comes just days after SM Entertainment sold 217 billion won ($172 million) worth of shares to Kakao Corp on Tuesday. This gave the country’s largest mobile messenger company a 9.05% stake and gave SM an ally to fight founder and largest shareholder Lee Soo-man.
Speaking about BTS, if you’re interested we’ve written about the band’s members as well:
- Jimin From BTS Steals Dior Menswear Show in Paris.
- Is V from BTS Going to Be Brand Ambassador for Celine?
Lee owns 18.4% of the company whose name is made up of his initials. In recent years, he has been in conflict with the company’s current management over how the company does business with his private company.
The former SM Chief Producer hasn’t had an official job at SM in more than a decade, but he is said to have had a big impact on how SM’s K-pop acts are managed and trained. SM Entertainment was very critical of HYBE’s plan to buy a company.
SM said in a statement –
“We oppose all aggressive outside mergers and acquisitions including HYBE.”
HYBE said that it wanted management rights to improve its position in the K-pop business. HYBE Chairman Bang Si-Hyuk said in a statement –
“(We) fully agree with Lee’s strategic initiatives including metaverse, a multi-label system, and the sustainable vision campaign.”
Lee is selling his 14.8% stake to HYBE for 423 billion won. HYBE made an offer of 120,000 won per share in a tender offer, which was 22% more than what SM Entertainment was worth when the market closed on Thursday. At 114,200 won, the price of SM shares went up 16%.
Align Partners Capital Management (APCM), a local activist fund that owns about 1% of SM, said the offer price was too low and should be raised because of SM’s growth potential.
In a note, NH Investment & Securities said that Lee and HYBE seemed to have joined forces because Lee needed to find a partner quickly to compete with the board of directors, Kakao, and APCM.
Lee filed a provisional injunction on Wednesday to stop the sale of the stake to Kakao. He said that giving Kakao new shares is “illegal” and is meant to weaken the position of the current largest shareholder.
Kakao said that its deal with SM would help it work together on projects like global K-pop auditions, but on Friday it didn’t want to say anything.
The K-pop band BTS is managed by the company HYBE. Aespa and NCT are also well-known K-pop groups that belong to SM.
South Korea’s pop music industry was run for years by three big companies: SM, JYP, and YG Entertainment. However, when the K-pop boy band BTS became famous around the world, HYBE became bigger than the other three companies.
But over the next couple of years, all seven BTS members are expected to start their military service. The oldest member of the group, Jin, was the first to do so in December. The whole septet won’t be back together again until 2025.
Kim Do Heon, a music critic, said that HYBE will benefit from SM Entertainment’s wide range of artists now that the group is on break.
Kim said –
“HYBE became a behemoth but its weakness was not having legacy. SM is a company that existed throughout K-history pop’s and will bring heritage to HYBE.”