Hybe to become biggest shareholder of SM Entertainment on share deal

[Courtesy of Hybe]

Hybe Co., the label behind global sensation BTS group, announced Friday that it agreed to acquire a 14.8 percent stake in SM Entertainment Co. for 422.8 billion won ($334 million) to become the biggest shareholder of South Korea’s biggest K-pop agency.

According to multiple industry sources, Hybe reached a deal to buy 3,523,420 shares from SM founder Lee Soo-man for 120,000 won per share. Hybe is also willing to publicly buy smaller SM shareholder stakes, along with this latest acquisition. Lee is currently owns the biggest stake of 18.46 percent.

With this latest acquisition, Hybe will be able to expand its footprint in the K-pop scene. The label is home to many globally popular K-pop boy bands and girl groups, including Seventeen, Tomorrow X Together, Enhypen, NewJeans and Le Sserafim. SM Entertainment is regarded as the pioneer of K-pop’s popularity overseas and has been home to many pop groups, including TVXQ, Super Junior, Shinee, Exo, NCT and Aespa.

“Chairman Bang Si-hyuk and former SM Entertainment Chairman Lee Soo-man have shared insights and concerns for the future of K-pop and reached a consensus,” Hybe said.

Commenting about the metaverse and multi-label systems, Bang said he agreed with what Lee and SM Entertainment have been seeking in terms of business strategies, and said that Hybe would provide input to “expand the K-pop realm in the global market.”

[Courtesy of SM Entertainment]

Hybe plans to make sweeping reforms in the managerial structure at SM Entertainment.

“We have a top-notch, transparent ownership structure and control based on our board of directors, and have led the industry in operating multi-labels and developing fandom platforms,” Hybe said. “We will be able to provide active input in improving SM Entertainment’s ownership structure.”

Lee has reportedly given up the agreed fees he would receive from his production company Like Planning, as he sold his share to Hybe.

Hybe has been in competition with Kakao Corp. and CJ ENM Co. for SM shares, but wasn’t the front runner until Lee Soo-man proposed the BTS agency take over his stake, amid his ongoing conflict with SM management. Lee has been the largest shareholder of SM, but his control was in the process of waning as Kakao agreed to buy a 9.05 percent stake in the company by buying shares from a rights offering and convertible bonds.

Earlier, 25 executives from SM Entertainment opposed Hybe’s move and said in a statement that they reject to “any and all hostile takeovers and share sales that ignores the values that have been sought together with the SM artists.”

The move came after SM Entertainment announced last week that it will end almost 30 years of management centered on Lee and reassign artists to multiple production centers and labels.