SM Leisure deal: A takeover struggle for the future of K-pop is raging

Hong Kong/Seoul
CNN
 — 

Kakao, 1 of South Korea’s major internet giants, has doubled down on its quest to just take handle of SM Enjoyment, the iconic K-pop new music company.

The tech company introduced Tuesday that it would find to buy up to 35% of the new music label, just times right after a earlier share sale between the two functions was blocked by a Korean court docket. If profitable, it would very own about 40% of the business.

Kakao and its enjoyment device have released a tender provide totaling around 1.25 trillion Korean received ($962 million), in accordance to a regulatory filing. It designs to give SM shareholders 150,000 won ($115) for every share. That would be a significant quality to what they have been presented just past 7 days by HYBE, a further Korean music agency greatest recognised for its representation of superstar boy band BTS.

If successful, it would also make Kakao SM’s biggest shareholder, a position presently held by HYBE, K-pop’s top rated agency because of to the results of BTS.

Last 7 days, HYBE experienced available buyers 120,000 won ($92) per share in its possess tender offer, through which it had hoped to receive a even more 25% stake of SM. On Monday, the BTS agency uncovered that its bid had tanked, boosting its holding by only .98%.

HYBE now owns 15.8% of SM, a regulatory filing confirmed, composed of shares attained from the tender offer and its previous keeping of 14.8% purchased by means of a independent offer very last month.

The most up-to-date shock shift by Kakao, one of the country’s most significant tech firms, adds to an now complex string of shareholder battles enjoying out about SM Amusement.

SM was launched by Lee Soo-male, a legendary songs producer who is broadly referred to in South Korea as “the godfather of K-pop.” The corporation is regarded for symbolizing strike artists, this sort of as NCT 127, EXO, BoA and Girls’ Technology.

Not too long ago, Lee has been battling his firm’s administration on several fronts — together with how a great deal of the corporation need to be marketed to both Kakao or HYBE.

HYBE entered the fray previous thirty day period, when Lee offered most of his own shares to the company for 422.8 billion Korean won ($334.5 million). He retains a stake of 3.65%, according to a Monday regulatory submitting.

In current months, HYBE has labored to elevate its total holding to 40%, kicking off a shockingly general public spat with SM’s leadership, who accused the previous of attempting to forge a hostile takeover and eventual monopoly. HYBE has dismissed all those fears, noting that its initial stake was acquired “with consent” from Lee.

Meanwhile, Lee is also sparring with SM management on its desire to perform a lot more intently with Kakao.

The online titan is ubiquitous in South Korea, recognised for its massively well-liked messaging company, Kakao Speak, and music streaming system, Melon, which has been likened to the country’s variation of Spotify.

Kakao and its Kakao Leisure device currently at this time keep 4.9% of SM, the business instructed CNN in a assertion Tuesday.

Final month, the company mentioned it had agreed to acquire a 9% stake of SM by buying new shares and convertible bonds. But Lee moved to block the deal through a court docket injunction.

In a statement shared with CNN at the time, his legislation business, Yoon & Yang, mentioned that Lee and SM were being “going by means of a business enterprise administration dispute,” and that it was illegal “for the SM board of administrators to situation new stock and convertible bonds to a third party” when these types of a dispute was ongoing.

On Friday, the Seoul Japanese District Court docket accepted Lee’s injunction ask for, banning SM Amusement from offering new shares or issuing convertible bonds to Kakao, Lee’s legal representative explained to CNN in a assertion.

Kakao is pressing forward nevertheless, inviting SM shareholders to acknowledge its tender give, which ends on March 26.

Kakao would like a strategic small business partnership with SM, “judging just about every other to be the best partners” to contend in opposition to global leisure conglomerates.

Now, these plans are “under risk,” leaving Kakao no decision but to secure the most significant shareholder place in SM to “maintain a secure partnership,” the tech agency instructed CNN in a statement.

Kakao traders appeared wary of the offer. Its shares closed 3% lessen in Seoul on Tuesday, when SM’s shares soared 15%.

SM, for its section, claimed it preferred to shift ahead with Kakao since of its “respect [for] the existing management’s endeavours to tackle things that have hindered SM Entertainment’s progress.”

“Unlike HYBE, which seeks to get control of SM’s board of directors via a hostile [acquisition], Kakao respects SM’s special tradition and id, and will make sure the company’s independent operation, as perfectly as SM artists’ constant functions,” it extra.

Lee did not right away answer to a request for comment on information of Kakao’s tender offer you on Tuesday, when HYBE did not promptly reply to a request for remark on its subsequent ways.