K-pop powerhouse Hybe, owner of global megastars BTS, has suffered a major setback in its bid to acquire a controlling stake in rival SM Entertainment, the label behind popular K-pop stars including Girls’ Generation, TVXQ and Super Junior.
Hybe managed to purchase only a small fraction of the SM shares it had aimed for, buying 233,817 for a total of $21.6mln, a far cry from the nearly six million shares it had targeted.
SM stakeholders, it seemed, were not enticed by Hybe’s offer price.
SM's board and leadership had urged shareholders not to sell to Hybe and instead pursued a capital tie-up with Korean social media giant Kakao Corp.
The tepid response from shareholders meant that Hybe only holds less than 16% of SM’s shares including the 14.8% holding it acquired from SM founder Lee Soo-man.
A successful acquisition of six million shares would have given the group a controlling interest in SM Entertainment.
Corporations battle for K-pop supremacy
K-pop has become something of a battleground in corporate Korea of late.
Korea’s competition watchdog the Korea Fair Trade Commission (KFTC) flagged market dominance concerns for Hybe’s attempted takeover of SM Entertainment, noting the potential impact on the prices and quality of management, record sales, streaming, tours and merchandise.
Hybe’s attempts to consolidate the K-pop scene have also faced competition from activist investor Align (NASDAQ:ALGN) Partners, which owns a 1% stake in SM Entertainment.
Align’s chief executive Lee Chang-hwan criticised Hybe's offer to buy SM shares at US$94.88, calling for the offerin to be “meaningfully upgraded”.
SM Entertainment sought to fend off Hybe’s hostile takeover through a capital tie-up with internet giant Kakao Corp, but these plans were scuppered by SM’s founder Lee Soo-man, who opposed the deal and would have seen his stake in the company diluted if the deal went ahead.
Now it seem that SM’s shareholder’s have done the work for the company.
At least the plot lines to BTS songs are a bit more straightforward.