South Korea-based music giant HYBE has officially ended its bid to acquire a 40% stake in rival K-pop company SM Entertainment.
HYBE said in a statement today (March 12) that it was suspending its takeover bid following discussions with technology company Kakao – its competitor in the SM takeover process.
HYBE last month acquired A 14.8% stake in SM Entertainment, for approximately US$335 millionthrough the acquisition of shares from Lee Soo-man, former founder of SM Entertainment.
HYBE then made its public intention to get a supplement 25.2% shares of SM Entertainment – which would have brought HYBE’s total stake to 40% – via a takeover bid to minority shareholders of SM.
If successful, the move would have seen HYBE spend ≈$565 million on SM shares.
Kakao / Kakao Entertainment then launched its own takeover bid for SM shareholders at a higher price per share than HYBE’s offer. Kakao seeks to acquire up to 35% from SM Entertainment for approx. US$960 million through the process.
Kakao had already reached an agreement to buy 9.05% of SM in February, through the purchase of newly issued bonds and shares. However, Lee Soo-man subsequently successfully blocked this takeover attempt in a Seoul court via an injunction.
HYBE’s attempt to acquire a 40% stake in SM has consistently met with strong resistance from The management of SM.
Today (March 12), HYBE officially withdrew from the battle for control of SM, issuing a statement that reads: “HYBE made this decision after observing that the market was showing signs of overheating in due to competition with Kakao and Kakao Entertainment.”
HYBE added that it had “also considered the potential negative impact on HYBE’s shareholder value”.
HYBE’s statement continued, “HYBE acquired the shares of former Chief Producer Lee Soo-man and made the tender offer based on a fair acquisition price range, taking into account the long-term value of SM and any costs that may arise in the post-merger integration process.However, HYBE determined that the acquisition price of SM exceeded the fair acquisition price range while the competition with Kakao and Kakao Entertainment was intensifying.
“In light of recent developments, HYBE has discussed the matter with Kakao and reached an agreement to suspend the process of acquiring SM’s management rights.”
“HYBE has considered the possibility that this acquisition, along with the tender offer, could harm shareholder value and fuel market overheating…In light of recent developments, HYBE has discussed the matter with Kakao and reached an agreement to suspend the process of acquiring SM management rights.
“At the same time, the two companies have agreed to cooperate on issues related to their platforms. HYBE has thoroughly considered the internal and external factors and has decided to put the SM acquisition process on hold and expresses its gratitude to everyone who has supported and encouraged the acquisition of SM so far.
SM Entertainment’s biggest artists include Aespa, BoA, Super M, Super Junior, and EXO.
HYBE hasn’t just been busy spending money on M&As in Korea this year, of course.
In February, HYBE America – led by CEO, Scooter Braun – announced that it had acquired an entertainment company and record label born in Atlanta, Quality control.
The price of this agreement, as confirmed in a regulatory filing in Korea, was about 300 million US dollarswith $250 million in cash and an additional $50 million in equity.The music industry around the world