Kakao to acquire SME as HYBE drops out due to fearing a bidding war, SME confirms partnership

The struggle for control of SM Entertainment has had twists and turns everywhere in the saga, but the latest is perhaps one of the most surprising. Following Kakao‘s tender offer, there were reports just yesterday that HYBE was in the driver’s seat for the shareholder’s vote, but they’ve now the company have said they will halt acquisition attempts of SME.

The tech giant Kakao and its entertainment unit, Kakao Entertainment Corp., will have management control over SM Entertainment, while Hybe will cooperate with Kakao in the platform business, Hybe said in a press release.
Kakao said separately that it will continue to buy the shares of SM through March 26 as planned.

They basically have said they didn’t want to get into a bidding war, as Kakao had indicated they would go over the top, regardless of price. However, they will cooperate on other platform IP for tech and stuff.

According to a press release, HYBE “made this decision after observing that the market has been showing signs of overheating due to competition with both Kakao and Kakao Entertainment.”
The agency added, “HYBE contemplated the possibility that this acquisition, along with the tender offer, may harm [HYBE] shareholder value and fuel overheating of the market, in making the decision.”
Not only did HYBE and Kakao reach an agreement regarding SM Entertainment’s management, but they also agreed to “cooperate on platform-related matters” in the future.

As for Kakao, they are now obligated to buy 35% of SME through the tender offer and own 4.9% already to make it close to 40%. SME says in a statement that they’ll remain independent and go ahead with the SM 3.0 plan.

SM Entertainment will respect HYBE’s decision to halt its takeover of SM, as agreed upon by Kakao and HYBE.
SM will use this agreement as an opportunity to push forward at full speed with our “SM 3.0” strategy that we promised to our shareholders, company members, fans, and artists; and we will make sure to achieve our vision for the future of leaping forward as a global entertainment company that focuses on its fans and shareholders. In doing so, we will raise our enterprise value for all shareholders and continuously expand our policies for shareholder returns.
Kakao announced today in a statement, “SM Entertainment’s strongest assets and driving force are its employees, artists, and fandoms; and in order to respect them, we will maintain autonomous/independent operations, and we will accelerate global growth with a focus on the current management’s strategic direction and vision for the future, including ‘SM 3.0.’” The “SM 3.0 board of directors” that will be launched at the upcoming shareholder meeting on March 31 will create the world’s greatest “IP x IT” synergy with Kakao, the optimal horizontal strategic partner, and will open up the “Next Level” of the K-pop industry.
We would like to express our deep gratitude to the SM shareholders, fans, employees, artists, and everyone else invested in this matter who rooted for and supported SM Entertainment until the end, even amidst the unexpected confusion that followed our SM 3.0 strategy announcement on February 3.

Gonna be honest, I was looking forward to a mess at the shareholders meeting at the end of the month. But at least this still provided its share of entertainment when it seemed like every HYBE stan yesterday was talking about how the company was genius and making Kakao bow to them … and now this happens, where they have to backtrack immediately.

For what it’s worth, I do think Kakao’s strategy was rather insane in terms of overpaying for SME. There’s also the fact that they currently seem obsessed with AI/Metaverse/Crypto platforms recently when it comes to entertainment.

There are no good guys in this saga, but at least Lee Soo Man doesn’t appear to get his ideal result from all of this, which is nice for once.


Avatar photo
Thot Leader™