HYBE takes upper hand in SM takeover after court issues injunction
Published: 05 Mar. 2023, 17:00
HYBE has taken the upper hand in the SM takeover battle against Kakao after a recent court decision.
The Seoul Eastern District Court on Friday issued an injunction preventing SM from selling 217.2 billion won ($167 million) worth of new shares to Kakao, throwing a wrench in the company's plans to become the second largest shareholder of SM by closing a deal to buy a 9.05 percent stake on Monday.
It was revealed that HYBE had signed a deal on Thursday to buy another 0.98 percent of SM stock from Hyosung Group's affiliate Galaxia SM, bringing HYBE's total stake to 15.78 percent, according to a public disclosure.
Galaxia SM is a sports marketing and management company.
Galaxia SM participated in HYBE's tender offer to ultimately attain a 40 percent stake of SM by buying stock at 120,000 won per share.
The offer ended on March 1.
HYBE will be buying 233,813 SM shares from Galaxia SM for 23.1 billion won. The deal will be completed on Wednesday.
HYBE purchased 14.8 percent of SM Entertainment from the founder last month, making it the largest shareholder of the agency, home to boy band NCT and girl group aespa. Founder Lee previously owned 18.46 percent.
“SM was a challenge, happiness and a blessing for me,” Lee said in a letter to SM he that publicly released after the court decision came out.
“The post-Lee Soo-man SM has been my longstanding concern,” he said.
Lee went on to say that HYBE and its founder Bang Si-hyuk is the best replacement to take over SM after him.
“For me, ‘the best’ means in terms of production,” Lee said. “Although [HYBE] was a competitor to SM, BTS’s success is a source of pride for all citizens of Korea. HYBE’s chairman Bang Si-hyuk is someone like me, who has been through the lows and highs as a music producer.
“I’ve completed the first stage of my life as an SM founder, and I’ll move on to the second stage,” he said. “My next is where technology and culture fuse together. Step by step, I’m steadily making my way in that direction.”
HYBE also released a statement after the court decision Friday afternoon.
“Everything is falling into place as this decision puts a stop to the illegal attempt from SM’s current board to take control of the company,” HYBE said. “With heavy responsibility, HYBE will consistently strive to lead SM to become a company with a model corporate structure and a company that puts the interests of its shareholders, employees and artists above all else.”
Kakao said that it will soon release a statement regarding the court decision.
The official result of HYBE's tender offer is expected to come out this week.
SM’s share closed at 129,200 won on Friday.
Bang said during a recent interview with CNN that he is focusing on the upcoming general shareholder meeting rather than the result of the tender offer.
“I don’t think it matters whether we take 40 percent in the pending issue,” Bang said in the interview Tuesday. “I think the [upcoming] general shareholders meeting is the most important. Only once we obtain support there can we form the board of directors that we want.”
The shareholders meeting will take place on March 31.
BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]
with the Korea JoongAng Daily
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