HYBE to Sell Entire SM Entertainment Stake to Kakao, Ending Battle for Control of K-Pop Giant
HYBE will offload its 15% stake to its South Korean rival, marking an official end to the bidding war that erupted over SM.
South Korea’s HYBE said Friday (March 24) it will sell its stake in SM Entertainment, officially ending a bidding war between HYBE and the South Korean tech company Kakao for control of the K-pop agency that was key to the genre’s popularity and overseas expansion in recent years.
HYBE, home of superstar boy band BTS, said in a filing it will sell its roughly 15% stake in SM for nearly 564 billion won ($435 million) to Kakao, which earlier this month announced a tender offer aimed at acquiring up to 35% of SM Entertainment’s outstanding shares.
Kakao Entertainment owns Monsta X‘s K-pop record label, Starship Entertainment, as well as the South Korean music streaming app Melon, the North America-based webtoon company Tapas Entertainment and several media production companies. It’s a subsidiary of the tech conglomerate Kakao Corp.
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HYBE acquired most of its shares in SM in February from SM founder Lee Soo-man, who was recently ousted from the company after shareholders called for changes in SM’s structure. For over a decade, Lee exercised top-down control of the company he started in 1995, and shareholders had raised questions over millions of dollars he received in producer fees annually.
Lee sold his shares to HYBE in retaliation for a move by SM to issue stock to Kakao, ultimately prompting HYBE’s attempt to secure a majority stake in SM through a tender offer. HYBE relented in mid-March because, it said, outbidding Kakao could have “a negative impact on our shareholders.”
Just days after canceling the company’s bid for control of SM, HYBE founder/chairman Bang Si-hyuk reiterated his desire to expand beyond Korea in an effort to eventually compete with the three major labels – Universal Music Group, Sony Music Entertainment and Warner Music Group — on a global scale, stating the company must have a “sense of urgency” in doing so.
Bang additionally signaled a desire for outside support for K-pop companies in their attempts to rival the majors, including possibly from the South Korean government, which has helped elevate Korean companies in other industries into global players. HYBE has already made strides on that front with two U.S. acquisitions — Scooter Braun’s Ithaca Holdings and QC Media Holdings, parent company of hip-hop label Quality Control Music, which Bang said are “just the beginning” in its bid for worldwide domination.
SM and HYBE have in recent years dominated South Korean and global pop charts. Together they accounted for nearly half of all albums sold in South Korea in 2022, according to Korean chart company Circle Chart.
HYBE’s planned stock sale could net the company $87 million, the equivalent of a 25% return on its purchases of Lee’s shares one month ago, Reuters reported earlier on Friday.
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