K-pop stocks have soared after HYBE (BTS, NewJeans) became the top shareholder in its biggest rival SM Entertainment
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K-pop behemoth HYBE says the market has become "overheated" due to competition with South Korean internet giant Kakao
By James Hanley on 13 Mar 2023
K-pop behemoth HYBE has abandoned its controversial move to take over rival SM Entertainment.
HYBE, which is home to acts including BTS, Tomorrow X Together, NewJeans, LE SSERAFIM and Seventeen, says it has taken the decision due to the market “overheating”, amid competition with South Korean internet giant Kakao.
“HYBE assessed that the market situation had overheated due to competition with Kakao and Kakao Entertainment, which could negatively impact HYBE’s shareholders’ rights,” it says in a statement. “The two companies ― HYBE and Kakao ― also reached an agreement to seek cooperation on platform businesses.”
The Korea Times reports that Kakao will now work toward a controlling stake in SM and its management rights, while continuing to seek cooperation with HYBE on its platform business. Kakao offered SM shareholders 150,000 KRW (€108) per share, compared to HYBE’s previous offer of 120,000 KRW (€86) per share.
“Kakao and Kakao Entertainment respect HYBE’s decision to stop the move to acquire SM Entertainment”
“Kakao and Kakao Entertainment respect HYBE’s decision to stop the move to acquire SM Entertainment,” says a Kakao statement. “As a partner sharing mutually positive impacts, Kakao and Kakao Entertainment will continue various strategic cooperative relations with HYBE and SM Entertainment to help stoke the global status of K-pop and K-culture.”
Seoul-based SM Entertainment says that it “welcomes” HYBE’s decision to suspend its takeover bid. Last month, HYBE purchased a 14.8% stake in SM, in a move led by HYBE’s global team that involved acquiring former chief producer Lee Soo-Man’s shares in SM – days after the announcement of the SM 3.0 business strategy and development plan.
It pledged to buy another 25% stake in a separate notice, leading SM Entertainment CFO Cheol Hyuk Jang to release a video denouncing HYBE’s “hostile takeover”. Days earlier, SM had sold KRW 217.2 billion ($172.8m) shares – a 9.05% stake – to Kakao Corp.
In February Bloomberg reported that SM had seen its profits soar 70% thanks to the return of concerts and live events, posting an operating profit of 25.2 billion KRW (€18.3 million) in Q4 2022. Sales rose 18.2% to 256.4bn KRO, with its number of concerts in the three-month period up 35 times on the same quarter in the Covid-hit 2021.
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