Hybe About to Sell SM Entertainment After Defeat in Bid War Against Kakao

On Friday, Hybe Corp. issued a statement announcing that it will be selling its shareholding in rival agency SM Entertainment. Hybe selling SM Entertainment has already sparked lots of reactions amongst netizens.

Hybe Corp, formerly known as Big Hit Entertainment, is a South Korean entertainment company that manages several popular K-pop groups including BTS, TXT, and NU’EST. The company was founded in 2005 by producer Bang Si-hyuk and has become a talent powerhouse in the industry.

On the other hand, SM Entertainment is one of the biggest entertainment companies in South Korea and has been a leading force in the K-pop industry since the 1990s. The company manages some of the most popular K-pop groups including EXO, NCT, and Red Velvet.

SM Entertainment
SM Entertainment

Hybe had originally acquired a 14.8% stake in SM in February from K-pop pioneer Lee Soo-man with an intention to buy the remaining 3% tranche held by Lee and launching an open offer to acquire another 15% from other shareholders. However, SM’s management aversed Hybe’s takeover bid and partnered with Korean tech giant, Kakao Corp and its subsidiary, Kakao Entertainment, by signing a content distribution deal and selling newly issued shares and bonds.

Just so you know, Kakao Entertainment is a South Korean entertainment company that is a subsidiary of Kakao Corporation, the operator of the country’s largest mobile messaging app, KakaoTalk. The company was founded in 2018 and was previously known as Kakao M before its rebranding in 2021. Kakao Entertainment is also home to several popular K-pop groups including IU, Apink, and WJSN, among others. The company also manages actors, producers, and other musicians.

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In addition to music, Kakao Entertainment is also involved in the production and distribution of various forms of content including films, TV dramas, and webtoons. The company’s focus on digital media and technology has contributed to its success and helped it become a key player in the entertainment industry in South Korea.

Although the court’s ruling had initially seemed to have turned the tables in Hybe’s favor, Kakao later made a richer offer to all shareholders up to 35% of SM’s currently existing equity. In response, Hybe conceded defeat on March 12th and withdrew its tender. In its regulatory filing on Friday, Hybe confirmed that it will now accept Kakao’s tender offer and sell its 15.8% stake representing 3.75 million shares in SM for $437 million (KRW564 billion).

It is reported that not all the shares being sold will be bought by Kakao as that would exceed the 35% limit placed by its offer, thus, excess shares would need to traded in the stock market. Prior to the sale, a three-party deal had been struck which saw Kakao gain management control of SM; however, Hybe had secured an agreement ensuring SM’s cooperation with their powerful online fandom business.

Interestingly, on Thursday, Kakao Entertainment America had announced a joint management deal with Columbia Records for K-pop girl group IVE, adding to its status as a K-pop talent powerhouse, and the already dominant Melon, Korea’s number one music streamer.

Source: Variety.com

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