Well, the SM Entertainment Internal War has taken another turn, as HYBE recently effectively failed to achieve their desired public takeover and Kakao has launched their own attempt in response.
Despite securing what seemed like an important win with Lee Soo Man getting Kakao’s deal for new shares shut down, HYBE didn’t win over anybody with its tender offer price.
I wasn’t sure how likely it was that Kakao would go way over the top to convince them, but that now appears to be exactly what they’re doing.
South Korean tech group Kakao launched a 1.25 trillion won ($962 million) offer for K-pop agency SM Entertainment on Tuesday, escalating a takeover battle with BTS manager HYBE, whose proposal did not win enough support from SM investors.
They are reportedly offering nearly 25% more.
The offer sent SM shares up nearly 15% to 149,200 won on Tuesday, just shy of Kakao’s tender price of 150,000 won to acquire up to 35% of the entertainment group behind popular K-pop groups such as Girls’ Generation, NCT and Aespa.
HYBE, which outgrew SM in recent years thanks to boy band BTS’s global success, planned to purchase an additional 25% of SM through a tender offer. But investors did not support its 120,000 won per share offer in light of an expected rival offer from Kakao.
The tech group, which already owns nearly 5% of SM, said its plan to control up to 40% of SM would strengthen its strategic partnership with SM.
“Kakao decided it is inevitable to secure the largest shareholder position to protect the partnership with SM Entertainment,” Kakao said in a statement.
Well … didn’t see that coming. To be fair, that’s mainly because it seems like this overvalues the stock.
However, while many people didn’t see SME being worth even as much as HYBE offered, apparently the prospect of the significant merger and being in on the coming entertainment monopoly/oligarchy provides more value than whatever the company itself is actually worth.
HYBE seems to agree as well, as they are currently plotting a response.
According to reports on March 7, HYBE is considering purchasing stock on the open market at a price of ₩180,000 KRW (about $139 USD) per stock, which is 20% higher than the ₩150,000 KRW (about $116 USD) Kakao is planning on paying per stock. The report states that HYBE plans on securing 25% of SM Entertainment through the public market.
Although many insiders felt it would be difficult for HYBE to counter Kakao’s additional purchase, according to reports, HYBE will be able to muster up enough resources for the acquisition. Worth noting are reports stating that HYBE recently contacted Morgan Stanley as it looks to attract up to a reported ₩1.00 trillion KRW (about $770 million USD) in new investments.
Folks, it’s bidding war time.
Shareholders meeting on March 31, which is basically the World Cup final.