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HYBE to become largest shareholder in SM Entertainment

Posted February. 11, 2023 07:14,   

Updated February. 11, 2023 07:14


BTS agency HYBE announced that it would acquire SM Entertainment (SM), Korea's first-generation K-pop entertainment company. A mega-giant entertainment agency holding both BTS and EXO under its umbrella is no longer a distant reality.

HYBE said on Friday that it signed a contract with SM's founder Lee Soo-man the day before under the condition to buy 14.8% out of Lee's total 18.47% stake at 120,000 won per share, making 423 billion won. The company also announced that it seeks to buy up to 25% of SM shares by March 1, 2023, held by minority shareholders.

The news came just days after Kakao Corp., Korea's top messenger operator, acquired 9.05% of the SM shares on Tuesday, teaming up with the SM management, which had disputes with the founder Lee. However, Lee, who named the company with his initials, sold his shares to HYBE that “came to his rescue” in the fight against estranged management, possibly turning the tables and making the rival agency its largest shareholder.

With disputes over SM management rights between the management and the former chief producer expected to broaden as they team up with Kakao and HYBE, respectively, market analysts assess that HYBE has the upper hand for the first round. HYBE may end up securing 39.8% of the total SM stakes, enough to stably control corporate management if it buys target shares held by minority shareholders.

Many forecast that the acquisition will be a powerful game-changer for the K-Pop industry as the nation's two biggest entertainment companies team up to create a synergetic effect. HYBE is home to mega K-pop bands, including BTS, New Jeans, and LE SSERAFIM. At the same time, SM possesses intellectual property rights over K-pop artists, including BoA, Girls' Generation, TVXQ, and EXO, and manages popular bands such as NCT and Aespa.

HYBE will become an overwhelming leader in the industry if the acquisition completes successfully, increasing its market capitalization to over 10 trillion won by adding SM's 2.4 trillion won to its current value of 8.2 trillion won. The acquirement will widen the gap further with JYP Entertainment, the industry's No.2, with a market capitalization of 2.6 trillion won.

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