Earlier this month, BTS agency Hybe (KRX: 352820) purchased nearly 15 percent of SM Entertainment (KRX: 041510) in a deal that was reportedly worth $324 million. Now, with Hybe having set its sights on scooping up a controlling 40 percent stake, SM is firing back against the “hostile takeover.”
The much-publicized SM Entertainment investment represents just the latest in a series of expansion initiatives from Seoul-headquartered Hybe, which has in 2023 quietly made Scooter Braun the sole CEO of Hybe America and purchased Quality Control.
Upon announcing the latter deal, Hybe – the bestselling act of which remains on hiatus – emphasized its goal of developing “a truly global entertainment platform.” And SM, the company behind K-pop stars such as Exo and Red Velvet, kicked off February by detailing a seemingly far-reaching “3.0” reorganization.
Notwithstanding this evolution, however, the Woollim Entertainment owner SM is making clear that it doesn’t approve of Hybe’s sizable investment or broader takeover plans, as mentioned at the outset. To be sure, SM Entertainment CFO Jang Cheol-hyuk took aim at the purchasing company in a 15-minute YouTube video, aptly entitled “The reason why SM is against HYBE’s hostile takeover.”
“As soon as SM’s new vision, SM 3.0, was announced,” Jang Cheol-hyuk communicated, per SM’s translation of his Korean-language remarks, “the largest shareholder sold his stake, and a hostile takeover attempt by a competitor started.
“This is an attempt that ignores not only the fierce deliberation and efforts of the 600 SM employees who have dreamed of becoming the number-one entertainment company in the world, but also the values and pride of SM, which it has pursued together with the fans and artists,” he continued.
Then, after recapping the circumstances surrounding Hybe’s initial 14.8 percent investment, the subsequent tender offer, and the “empty” promise that SM would retain independent management post-buyout, the exec rattled off all manner of qualms with the takeover.
“Hybe is already saturated with the artists from its labels,” the SM Entertainment CFO claimed. “As a result, SM artists will have no choice but to be put on a lower priority. … Some say there would be a synergy if SM artists joined Hybe’s WeVerse platform. However, as mentioned before, this would simply create additional profits for Hybe without any benefits for SM.”
Lastly, Jang Cheol-hyuk made the case that K-pop’s notoriously passionate fanbase will suffer should Hybe’s takeover come to fruition.
“Ultimately, K-pop fans will be affected the most by the monopoly,” he relayed after highlighting the significant market share that the combined company would possess. “SM charges reasonable prices for concert tickets to allow a broader scope of fans to enjoy cultural performances.
“Meanwhile, Hybe has taken advantage of its position in the K-pop market to almost double the price of concert tickets, as reported in the news several times recently. … The consolidation of SM and Hybe will accelerate ticket price increases, adding burden to fans who love and support K-pop.”
Needless to say, the Supertone owner doesn’t feel the same way, and despite the concerns expressed by SM (as well as a potential bidding war involving Kakao Entertainment, which acquired over nine percent of SM two weeks ago), Hybe CEO Park Ji-won in a Bloomberg interview described the takeover as a means of assuring K-pop’s continued growth and relevance on the world stage.
Hybe stock dipped by 1.3 percent during today’s trading hours and was worth ₩182,100 (currently $139.30) per share when the market closed. SM Entertainment stock, for its part, added 1.4 percent to its value to finish at ₩123,500 ($94.46) per share.