After a much-publicized battle for control of rival K-pop company SM Entertainment, Hybe has officially opted to “discontinue the acquisition process” at once, citing the possibility that completing the buyout would “harm shareholder value.”
The BTS agency just recently announced the conclusion of its effort to take control of SM Entertainment, including by replacing the business’s executives and board. To recap, Hybe last month bought 14.8 percent of SM from its founder and former chief producer Lee Soo-man, signaling soon thereafter that it would look to secure a controlling 40 percent interest.
But SM higher-ups promptly pushed back against the plans, including with firmly worded video messages and an overview of a “3.0” transformation initiative that they said wouldn’t come to fruition if Hybe closed the deal. Meanwhile, Kakao Entertainment simultaneously moved to scoop up a more than nine percent SM stake and establish a jointly owned division in the States.
Predictably, Hybe didn’t approve of the arrangement, which a South Korean court ultimately blocked. However, a tender offer from the company behind Tomorrow X Together (priced at ₩120,000 per share, or $92.53 per share at the present exchange rate) failed to bring about the desired 25 percent ownership, instead delivering just another 0.98 percent to Hybe.
Kakao then unveiled a tender offer of its own (priced this time at ₩150,000/$115.67 per share), and it appeared that a management-centered showdown would occur during SM’s shareholder meeting at March’s end.
As mentioned at the outset, though, Hybe has formally disclosed plans to put the dispute to rest, besides cooperating with Kakao “on matters related to their platforms” moving forward.
“HYBE made this decision after observing that the market has been showing signs of overheating due to competition with both Kakao and Kakao Entertainment. The company has also taken into account the potential negative impact on HYBE’s shareholder value,” the Seoul-headquartered entity relayed.
“HYBE contemplated the possibility that this acquisition, along with the tender offer, may harm shareholder value, and fuel overheating of the market, in making the decision,” proceeded the Quality Control owner. “In light of recent developments, HYBE discussed the matters with Kakao and reached an agreement to suspend the process of acquiring SM’s management rights. Concurrently, the two companies agreed to cooperate on matters related to their platforms.”
In remarks of its own, SM said that it would “respect” Hybe’s decision and proceed with the aforementioned 3.0 transformation. Similarly, Kakao has emphasized that it will allow SM to operate independently and spearhead the associated projects.
When the market closed on Monday, Hybe stock (KRX: 352820) was worth ₩189,600/$146.20 per share, reflecting a 3.21 percent improvement from Friday. Similarly, Kakao stock (KRX: 035720) rose 4.65 percent to ₩60,800/$46.88 per share, whereas SM stock (KRX: 041510), notwithstanding an approximately $50 million “share buyback and retirement plan,” parted with 23.48 percent of its value to touch ₩113,100/$87.21 per share.