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The Korea Herald
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THE INVESTOR
April 18, 2024

Market Now

Kakao’s SM acquisition nears completion

  • PUBLISHED :March 27, 2023 - 09:20
  • UPDATED :March 27, 2023 - 09:20
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This photo shows the headquarters of SM Entertainment in Seongdong-gu, Seoul on March 12. (Yonhap)

Kakao's plan to acquire leading K-pop agency SM Entertainment is nearing its final stage, with the music label's annual general meeting set to take place Friday.

According to industry sources, the South Korean internet and portal giant's tender offer to buy a 35 percent stake of SM has won enough support from SM investors. Earlier this month, Kakao offered to buy off shares at 150,000 won ($115) each in a bid to become the largest shareholder of the K-pop powerhouse.

The official result of the tender offer will be released Tuesday through a public announcement.

SM's annual general meeting will take place on Friday. Though the meeting was projected to turn into a battle between Kakao and Hybe, the major K-pop agency behind the global sensation BTS, the rivalry to take over SM came to a sudden halt when Hybe announced it would drop out of the race on March 12.

Kakao aims to broaden its entertainment business spectrum with SM’s wide range of intellectual property. The approval of SM's shareholders needed for the acquisition will be decided during Friday's meeting.

Hybe, which holds a 15.78 percent stake in SM, also accepted Kakao's tender offer, agreeing to sell its shares of SM at 150,000 won, up 30,000 won from the price at which it had acquired the shares from SM’s founder, Lee Soo-man.

Lee decided to sell his shares to Hybe after the current SM board joined hands with Kakao in a bid to drop him from management.

Kakao and its affiliate Kakao Entertainment, SM and activist fund Align Partners, which have announced not to join in the tender offer, will not be selling their total of 7.31 percent stake in SM, leaving 92.69 percent of shares owned by minority and institutional investors for sale to Kakao.

If all other investors have agreed to accept the tender offer, Kakao will acquire only 37 percent of the leftover 92.69 percent stake by proportion, as its bid was to acquire an additional 35 percent stake in the company.

Under the calculation, Hybe will be able to sell only some 1.39 million of the 3.75 million shares it owns, making a marginal profit of 30,000 won per share, which adds up to a total of 41.7 billion won.

By Im Eun-byel (silverstar@heraldcorp.com)

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