SM plunges as BTS label Hybe and Kakao end K-pop takeover battle
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SM shares fell as much as 22 per cent during Monday morning trade.
PHOTO: REUTERS
SEOUL – Shares of SM Entertainment plunged after BTS label Hybe said it would back down from a battle over the smaller K-pop agency, ending a bidding war with Internet giant Kakao that had embroiled some of the biggest names in South Korean entertainment.
SM fell as much as 22 per cent during Monday morning trade to below Kakao’s tender offer price of 150,000 won per share. Hybe and Kakao both rallied by more than 7 per cent, before paring gains to around 2 per cent. Smaller entertainment rivals also dropped.
Hybe had faced off with Kakao for a controlling stake in SM – a pioneer that first took K-pop outside South Korea. Both saw SM as key to reaching a broader audience and driving K-pop into the mainstream.
Their bidding war almost doubled SM’s stock price to a record last week. But after Kakao launched its tender offer at a premium to Hybe’s, Hybe said over the weekend that it would halt its bid for control of SM.
Shares of other K-pop agencies are also falling. JYP Entertainment fell as much as 9.5 per cent, the most since March 2020, while YG Entertainment shed about 7 per cent.
The end of the takeover battle is affecting overall investor sentiment towards entertainment stocks, said Mr An Hyungjin, chief executive of Billionfold Asset Management. “SM was receiving high valuations during the takeover battle that also helped push up the value of other entertainment stocks.”
Hybe’s withdrawal clears the way for SM’s plan to tie up with messaging app operator Kakao, which plans to shore up its K-pop offerings at Kakao Entertainment and boost traffic to its platform.
Kakao and its entertainment unit will continue with their tender offer to increase their holding in SM by March 26, and will boost business cooperation with both Hybe and SM, Kakao said in a separate statement over the weekend.
Hybe and SM agreed to cooperate in matters related to their platforms, the two said.
Nothing has been decided on Hybe’s current stake in SM, Hybe told Bloomberg News.
Hybe said it agreed to withdraw its internal director recommendations for SM’s board, but added that it was in discussions regarding outside directors.
In a separate statement, SM said it respected the decision, and would continue to expand shareholder returns and improve corporate values.
At market close on Monday, shares for SM Entertainment were down 23.48 per cent. JYP Entertainment lost 8.49 per cent and YG Entertainment fell 5.04 per cent. BLOOMBERG
