SM Entertainment asks shareholders to resist HYBE

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SM Entertainment asks shareholders to resist HYBE

Published: 01 Mar. 2023, 16:50 Updated: 01 Mar. 2023, 17:05

SM Entertainment, a Korean agency behind several K-pop stars, has asked its shareholders for their support ahead of a shareholder meeting scheduled in light of a recent takeover bid by its industrial rival Hybe.

According to industry sources Wednesday, SM Entertainment has sent letters to small shareholders pledging a dividend payout of 1,200 won ($0.90) per share. SM has planned a shareholder meeting for March 31.

On the cover were the words "SM board recommendations" in a circle, and a red "X" over the words "Proposals by former major shareholder Lee Soo-man," referring to SM's founder.

HYBE became the largest shareholder of SM on Feb. 22, acquiring a 14.8 percent stake from Lee, who owned 18.46 percent.

His remaining stake is also scheduled to be transferred to HYBE this year, as the deal included a put option that gives Lee the right to sell the remaining shares at a specific price within a month from either the time when the business combination is approved or the day when the deal is completed.

In its letter to shareholders, SM Entertainment called the ongoing saga "a critical turn of events that will never happen again in the Korean entertainment industry."

"Your decisions will affect the future of our company in a big way," the letter read. "This year's shareholder meeting is the last opportunity for us to elevate our corporate value as an entertainment company boasting the greatest pool of artists in the country, and also to resolve issues on SM's governance that have lingered for over a decade."

In a Q&A session, SM disputed the notion that being bought by HYBE, which runs successful labels, such as BigHit Music, Pledis Entertainment and ADOR, can be a boon for SM Entertainment.

"When HYBE unearths talented new artists, produces great music or finds great choreographers, it will send them to labels in which it has higher stakes than in SM, such as BigHit, ADOR, Source Music and Pledis," the letter read. BTS is a BigHit artist, and ADOR has hit the jackpot with the new girl group NewJeans.

"If HYBE only holds up to 40 percent of SM and other regular shareholders own the remaining 60 percent, then there is bound to be a conflict of interest between SM shareholders and HYBE shareholders," the letter continued. "HYBE and SM are the two biggest rivals in this industry."

Yonhap