HYBE (KRX: 352820) announced on February 10th that it has acquired a 14.8% stake in SM Entertainment, becoming the largest shareholder.
The company is also planning a takeover bid to secure its management rights in the company.
The takeover has led to a confrontation between the founder of SM Entertainment, Lee Soo Man, and the company’s board of directors, as well as Kakao, which recently acquired a 9.08% stake in SM Entertainment.
Lee Soo Man argued that the decision by the board of SM Entertainment to issue new shares and convertible bonds as part of Kakao’s equity investment was illegal and sought an injunction against the issuance.
HYBE’s decision to acquire the equity stake aims to strengthen the company’s competitiveness in the K-pop market and create synergies with SM Entertainment.
The company plans to become a “game changer” in the popular global music market by combining the global capabilities of both companies.
HYBE will continue to manage the operational structure of SM Entertainment and provide transparency in corporate governance.
Specifically, under the share acquisition agreement, HYBE will acquire the shares held by Lee Soo Man in SM Entertainment’s subsidiaries and work with him to improve corporate governance.
The future of SM Entertainment’s management is to be decided at a shareholders’ meeting next month. Kakao said acquiring a stake in SM Entertainment will maximize synergies and secure its leadership position in the music and content business.