South Korean entertainment company HYBE will acquire a controlling stake in rival SM Entertainment and become its largest shareholder with a stake of 14.8%.
In a regulatory filing released on February 10, HYBE announced that it had purchased 3.5 million shares of SM Entertainment founder and former CEO Lee Soo-man for $78.46 per share, for a total value of $334.3 million .
Lee, who is often referred to as the "godfather of K-pop," owns 18.5% of SM Entertainment and is selling his shares in 2021 to increase the company's value. However, after the sale, the company terminated its production deal with Lee's production company, Like Planning, due to investor claims that the relationship between SM and Like Planning affected shareholder value.
The deal between HYBE and Lee will expire on March 6 . HYBE also offered to buy another 25% of SM shares from other investors. In response, senior SM executives, including its co-CEO, issued a statement against "hostile takeover" by outside companies, including HYBE.
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A survey reportedly showed that 85% of SM employees were against the HYBE takeover.
One employee even went viral for his sad reaction to the shock, writing in a company review that he had lost motivation and pride in his job at the company.
Despite the mixed reaction, SM shares rose 16% to open in Seoul after the announcement, while HYBE shares rose 6%. Other rival entertainment companies such as JYP Entertainment and YG Entertainment also saw their shares rise.
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In a joint statement , HYBE Chairman Bang Si-Hyuk and Lee said they "agreed on a shared vision for the future of the [k-pop] industry."
The statement also said that HYBE agreed with Lee's initiatives for the future of the industry, including participation in the metaverse system, multi-tag system, and ongoing visibility campaigns.
Considered one of the Big Four K-pop entertainment giants, SM Entertainment has nurtured many influential artists since its founding in 1995, including BoA, Girls' Generation, Super Junior, and many more. Currently, the company's roster also includes Aespa, NCT 127, SHINee, and Red Velvet.
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First established in 2005 as Big Hit Entertainment, HYBE is also dominating the industry due to the global success of BTS . The company, through its subsidiaries, includes other K-pop groups such as Tomorrow X Together, ENHYPEN, SEVENTEEN, LE SSERAFIM, and NewJeans.
HYBE's acquisition of SM follows the company's recent acquisition of Quality Control Media Holdings , home to American hip-hop groups such as Migos, Lil Yachty, City Girls, and Lil Baby.
The acquisition marks Scooter Braun's first step as sole CEO of the HYBE division in the United States. In addition, the acquisition came after South Korean technology company Kakao announced that it had acquired a 9.05% stake in SM, which was later put on hold due to lawsuits by Lee's lawyer.
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