Kakao set to become largest shareholder of SM Entertainment

Kakao's office building in Pangyo, Gyeonggi [YONHAP]

Kakao is set to become the largest shareholder of SM Entertainment, following a contentious battle with HYBE.

The internet giant succeeded in acquiring a total of 39.9 percent of SM Entertainment in its tender offer, where it is offering 150,000 won ($115.30) per share, according to a statement Monday from Korea Investment & Securities that is handling the deal. The offer was valid until Sunday and Kakao will finalize the transaction Tuesday.

As Kakao already owns a 4.9 percent stake, it bid to purchase a 35 percent stake, or 8,333,641 shares. However, 18,880,227 shares were submitted in the offer, according to the statement.

The submitted shares of approximately 18.88 million constitute 80 percent of SM's total shares.

The offer’s competition rate recorded 2.27 to 1.

Kakao and Kakao Entertainment will not buy more shares than the initial amount, which prevents SM shareholders from selling all of their shares.

The threshold set by the financial firm stands at 44 percent of the total shares offered by the shareholders.

HYBE offloaded a 15.78 percent stake in the offer, but it will be left with 8.9 percent because of the ceiling. The agency behind BTS bought a sizable chunk of shares from SM founder Lee Soo-man.

Founder Lee did not participate in the offer. Lee retains a 3.65 percent stake.

Kakao will now become the largest shareholder of the K-pop agency that created boy band NCT and girl group aespa.

Before Kakao set the tender offer in motion, Kakao and Kakao Entertainment each owned 3.28 percent and 1.63 percent stakes. After the tender offer is finalized, each will own 20.78 percent and 19.13 percent, totaling 39.91 percent of SM.

The remaining 10,546,586 shares that Kakao did not purchase will be available to trade on Tuesday.

SM Entertainment’s share price plummeted 15.02 percent Monday to close at 91,100 won. During the peak of the SM takeover battle between HYBE and Kakao, the share price peaked at 161,200 won.

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