Bang Si Hyuk, chairman of HYBE, expressed his support for SM’s former executive producer Lee Soo Man by acquiring a stake in SM Entertainment through an official statement.
HYBE announced on February 10 that it has signed a contract to acquire 14.8% of SM’s 18.46% stake held by SM founder Lee Soo Man for 422.8 billion won ($386,000,000). HYBE has become the largest shareholder of SM, and will also conduct a tender purchase of shares in SM Entertainment held by minority shareholders in the future.
Check out the full statement of HYBE below!
We have signed a contract to acquire 14.8% of SM’s 18.46% stake held by SM founder Lee Soo Man for 422.8 billion won ($386,000,000). HYBE has become the sole largest shareholder of SM . The acquisition of SM is to unite the global capabilities of the two companies to become game changers in the global pop music market.
Chairman Bang Si Hyuk and former executive producer Lee Soo Man formed a consensus on ways to share K-pop’s future and find a solution before signing the contract.
Chairman Bang Si Hyuk said, ‘HYBE only walked the red carpet on the way that he (Lee Soo Man) pioneered and paved the way.’
Former general producer Lee Soo Man decided to actively support Chairman Bang Si Hyuk, who knew the value of culture as a musician and decided that he could share his philosophy on the future direction of K-pop.
Chairman Bang Si Hyuk said, ‘HYBE fully sympathized with the strategic direction such as the implementation of the metaverse, establishment of a multi-label system, and vision campaign to save the Earth. We will further expand K-pop’s status in the global market by investing in HYBE’s capabilities.’
We have confirmed Lee Soo Man’s willingness to improve SM’s governance. We plan to play an active role in SM’s governance improvement process as we have already led industry advancements such as multi-label strategy operation and fandom platform.
Former producer Lee Soo Man has already made a grand decision to terminate the contract between SM and private company Like Planning. In the process of the agreement with HYBE, some fees will not be paid to former general manager Lee under the sunset clause for three years from the end of the contract.
We decided to fully cooperate in improving the governance structure by transferring the shares of SM affiliates held at the individual level to HYBE. HYBE will also invest additional funds in improving the governance structure through clearing stakes in affiliates.
We plan to increase minority shareholder profits at the same time as acquiring shares in SM Entertainment. As part of that, we decided to buy minority shareholders’ shares at the same price as the largest shareholder’s stake acquisition price, and all procedures such as raising funds for tender purchases have already been completed.
We will create strategic synergy with SM in all areas of labels, solutions, and platforms, which are the three major business pillars. We will seek synergy between various solution businesses under SM and HYBE’s existing solutions businesses with the aim of expanding the global market’s fan platform further.”
HYBE plans to make every effort to advance SM’s operating structure in connection with the “global-level governance structure” announced by SM on January 15.
Meanwhile, while former executive producer Lee Soo Man and SM’s current management are currently at odds over SM management rights, Kakao announced on February 7 that it secured a 9.05% stake in SM by acquiring 1.23 million new shares issued by SM in the form of a third-party paid-in capital increase and securing 1.14 million shares (based on the conversion of ordinary shares). The total amount of the stake acquisition is 17.152 billion won ($13,000,000), and Kakao has become the second-largest shareholder of SM.
In response to this, SM’s co-CEO Lee Sung Soo and Tak Young Joo said , “The strategic alliance with Kakao is based on management judgment to accelerate the implementation of the SM 3.0 strategy, and has nothing to do with the management dispute claimed by the largest shareholder (former executive producer Lee Soo Man).”
However, the former executive producer Lee has already expressed opposition to Kakao’s acquisition of a stake in SM. On February 7, the legal representative for former executive producer Lee Soo Man said, “SM is now in a management dispute between its largest shareholder, Lee Soo Man, and All-Line Partners, which advocates shareholder activist funds. It is clearly illegal for SM’s board of directors to issue new shares and convertible bonds to a third party. On January 20, SM’s co-CEO Lee Sung Soo and Tak Young Joon agreed to Alain Partners’ proposal without any consultation with the largest shareholder, intensifying the management dispute against the largest shareholder. SM’s board of directors unilaterally allocated new shares and convertible bonds to third parties to expand their stakes and secure an edge in the control competition.”
On the other hand, SM’s current management defined HYBE’s acquisition of a stake in former executive producer Lee Soo Man as a hostile M&A. In a statement released before the official announcement of HYBE’s stake acquisition on February 10, they said, “As soon as the future core strategy, ‘Like Planning’s single production to multi-production center/label system, SM 3.0’, was announced, it is being discussed not only SM’s intense concerns and efforts but also the values it has pursued with artists. As SM is a company that has proudly led K-pop by numerous SM artists and is once again set to become a global entertainment-leading fan and shareholder-centered company through the SM 3.0 era, we work together with all executives and artists to clarify our opposition to all hostile M&As reported this time.”
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