This morning, HYBE announced that it has reached an agreement with Kakao to suspend the acquisition process and withdraw from the general meeting of shareholders with immediate effect. Kakao will follow the original plan to acquire 35% of the outstanding shares of SM Entertainment and obtain the right to operate, becoming the new owner of SM Entertainment.
HYBE and Kakao started negotiations on the 10th of this month, and finally announced an agreement on the third day. HYBE stated that it finally decided to abandon the acquisition because the acquisition price has exceeded the appropriate range: “HYBE’s competition with Kakao and Kakao Entertainment has caused the market to overheat, which may have a negative impact on HYBE’s shareholder value.” However, HYBE stated that it has reached a platform cooperation plan , the specific content is currently inconvenient to disclose; the 14.8% shares of SM Entertainment previously purchased from Li Xiuman have not yet decided how to deal with it.
According to the original plan, Kakao will acquire up to 35% of the outstanding shares of SM Entertainment at a price of 150,000 won per share before the 26th of this month. Kakao stated that “staff, artists and fans are SM’s most powerful assets and driving force”, and Kakao will respect them and guarantee its self-disciplined and independent management. In the future, we will combine SM’s IP and production system with Kakao’s IT technology and IP value chain advantages to create a value of one plus one greater than two and accelerate global growth.
At the same time, HYBE’s internal director candidates will withdraw from SM’s regular shareholders’ meeting at the end of this month, and people recommended by Kakao will form SM Entertainment‘s new board of directors and take control of the management. SM co-representatives Lee Sung-soo and Too Young-jun will step down and serve as the heads of each department.
Subsequently, SM Entertainment immediately issued a statement expressing respect for HYBE’s decision, and will produce a new “SM 3.0 Council” at the shareholders’ meeting: “Create “IP X IT Synergy” with the best partner Kakao, and create the K-POP industry “Next Level”.
Regarding the key to the agreement between HYBE and Kakao, according to people familiar with the situation, Kakao said at the negotiation table: “No matter how high HYBE raises the purchase price, we intend to bid higher. If HYBE sells at 220,000 yuan per share We have the ability to raise it to 240,000 for public acquisition.” After that, the negotiation atmosphere changed.
HYBE invested 440 billion to obtain 15.4% of SM shares, but eventually lost in the battle for management rights. Kakao has been working hard to acquire SM from Li Xiuman two years ago, and at one point almost sold it for 800 billion won, and finally spent 1.39 billion won to become the new owner of SM.
(Source: Kakao, Kakao founder and chairman Kim Bum-soo)
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