The KRW11.19 billion ($8.9 million) investment was made through a third-party placement of 1.23 million new ordinary shares and a KRW105.2 billion convertible bond.
The investment was agreed upon following a period of investigation disclosure between Kakao and SM Entertainment, which began in May 2021.
The two companies have now signed a tripartite business agreement with Kakao Entertainment.
Their goal is to raise the global profile of Korean culture by collaborating in the rapidly changing music and content industry.
Kakao Entertainment and SM Entertainment will leverage their respective networks, including overseas partners, to promote the global management of artists and provide K-pop talent through worldwide casting.
The three companies will also work together to develop future businesses by leveraging Kakao’s technological capabilities, such as artificial intelligence.
Both companies will contribute to the growth of domestic performance culture and the local economy through the planned Seoul Arena complex in Chang-dong, Dobong-gu, Seoul.
“SM Enterprises and Kakao have agreed to achieve synergies through strategic alliances and pursue comprehensive business cooperation as long-term partners,” SM Enterprises said in a statement.
Kakao’s latest investment underscores the growing trend of technology companies investing in the entertainment industry to diversify their business portfolio and serve the ever-increasing demand for high-quality content.