Yahoo Finance K-pop Pioneer Jumps on Hopes of a Bidding War to Defy BTS Label
(Bloomberg) -- SM Entertainment Co. surged to another record high, as expectations mount that more suitors may emerge to challenge BTS label Hybe Co. for control of the talent studio behind K-pop’s first forays overseas.
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Investors are betting internet giant Kakao Corp., which seeks to raise its profile in music through an alliance with the K-pop pioneer, may counter Hybe’s hostile takeover bid for SM shares. A local media report said Kakao had approached investment firm and K-contents giant CJ Corp. to jointly buy SM shares.
CJ Corp., a holding company of the group that runs CJ ENM Co., denied the report, saying that it is not considering buying a stake in SM, the agency behind Girls’ Generation and Super Junior.
Still, shares of SM Entertainment leapfrogged Hybe’s offer price during Wednesday trade in Seoul. The stock price rose as much as 9.5% to a record 127,900 won, above Hybe’s offer of 120,000 won per share. SM shares have jumped about 60% since the start of the year.
What started as a power struggle between SM Entertainment’s board and its founder Lee Soo-man has now grown into a complex battle involving the biggest names in Korean entertainment.
Hybe, the No.1 K-pop agency and the manager of NewJeans and Tomorrow X Together, last week joined hands with Lee to block SM from issuing new shares to Kakao. Hybe bought Lee’s 14.8% stake in SM and offered to buy another 25% from investors for a total of 1.14 trillion won ($900 million).
After SM Entertainment’s stock rose, Hybe said in a statement to Bloomberg it has no plans to change its offer price for now.
“Hybe probably will not raise its tender offer price as lifting the price can start an endless bidding war,” said Yoon Joonwon, a fund manager at DS Asset Management.
Dubbed the godfather of K-pop, SM founder Lee has filed an injunction to block a 217 billion won deal that would make Kakao, the operator of Korea’s dominant messaging app, SM’s second-biggest shareholder. Widely seen as a preliminary move to a takeover by Kakao, the deal could eventually challenge Hybe’s dominance over the K-pop industry.
Kakao has said nothing has been decided on whether to buy additional shares.
SM executives issued a statement opposing Hybe’s offer. Over the past year, the board had joined hands with activists to temper Lee’s influence over SM and explored a partnership with Kakao, seeking to use the internet platform’s reach to promote its artists.
Activist investor Align Partners Capital Management Inc., whose chief executive has been nominated to SM’s board, has said Hybe’s price is too low and that Hybe should buy all shares of SM, to prevent conflicts of interest between the shareholders of the two rival talent agencies.
(Updates with Hybe statement and analyst comment from fifth paragraph)
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