12 days after the official completion of the widely publicized SM Entertainment takeover campaign, BTS Hybe agency is selling its stake in a rival K-pop company.
This latest twist in the SM-Hybe showdown has recently become known in regulatory documents. In early February, shortly after the company acquired the quality control department and highlighted its ambitious plans for global expansion, Hybe acquired a 14.8% stake in SM from founder (and former chief producer) Lee Suman, thus becoming the largest shareholder.
And when Hybe announced the goal of increasing the stake to a controlling 40 percent stake, SM presented the basis for the “3.0” transformation and publicly opposed the planned takeover by a competing business. Both companies launched websites dedicated to promoting their positions, which were also explained by all sorts of detailed resources and videos.
Meanwhile, SM has unveiled an agreement with Kakao entertainment division (which is supported by Saudi Arabia and other countries), offering the sale of about nine percent of SM, the merger of distributors and the creation of a joint division in the United States. For obvious reasons, Hybe (successfully) tried to terminate the contract in a South Korean court.
But Hybe’s tender offer for another 25 percent of SM (priced at 120,000 pounds/ 92.57 USD per share) to achieve the aforementioned 40 percent controlling stake fell far short of the target, eventually handing Hybe another percent of the company. Subsequently, Kakao launched its own tender offer (this time at a price of 150,000 pounds / 115.71 US dollars per share).
The latter, and especially the observation “that the market is showing signs of overheating due to competition with both Kakao and Kakao Entertainment”, prompted Hybe to retreat. And now, according to the highlighted regulatory documents, the owner of Supertone wants to cash out all 3,757,237 of his SM shares.
According to the translation of the documents in Korean, the sale is expected to be completed on the 28th and will bring Hybe more than 563.59 billion pounds / 434.69 million US dollars – or 150,000 pounds per share at the price of Kakao’s tender offer for each of the 3.76 million SM shares of the company being sold.
Of course, since Hybe paid 422.80 billion pounds/326.10 million dollars or so for Lee Soo Man’s 14.8 percent stake, it looks like the deal will generate a significant return on the initial investment.
At the time of writing, SM Entertainment shares (KRX: 041510) were trading at 107,200 pounds / 82.68 US dollars per share, which is significantly lower than the tender offer price, despite the fact that they have increased by 43% since the beginning of 2023. Hybe shares (KRX: 352820), for their part, were worth 187,500 pounds / 144.62 US dollars per share, falling slightly compared to Thursday’s close.
