SM Entertainment terminates contract with Kakao

SM Entertainment headquarters in Seongsu-dong of Seongdong District, eastern Seoul [YONHAP]

SM Entertainment canceled a contract with Kakao to sell a large amount of shares to the tech company, the entertainment company announced Monday, in compliance with the recent court decision.

In the now nullified agreement, SM was offering 111.9 billion won ($86.2 million) worth of its new shares to Kakao and convertible bonds worth 105.2 billion won, granting it a total 9.05 percent stake.

The deal would have made Kakao the second largest shareholder after HYBE, which has 15.78 percent of SM.

However, the Seoul Eastern District Court on Friday issued an injunction preventing SM from selling 217.2 billion won worth of new shares to Kakao.

HYBE asked SM on Monday to prohibit any sort of behavior that violates the injunction; terminate any sort of contract formed related to acquiring new shares or convertible bonds; terminate the business contract it formed with Kakao; and withdraw the list of candidates for the new board submitted by Kakao.

“If SM does not carry out or violates the following measures, that is intentional malpractice on its part, which means that it is giving up or allowing its rights to be stripped away,” HYBE emphasized.

HYBE asked SM board members to reply by Thursday.

SM Entertainment's share climbed 0.7 percent to close at 130,100 won on Monday, HYBE went up 2.35 percent to 191,800 won and Kakao up 4.26 percent to 63,600 won.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]