HYBE Bang Si-hyuk: "I Will Realize Lee Soo-man's SM Vision" (Comprehensive)

HYBE Acquires 14.8% Stake in Lee Soo-man for 422.8 Billion KRW
Bang Si-hyuk: "Will Accelerate SM Governance Improvement"

[Asia Economy Reporter Kim Heeyoon] HYBE is making a surprise acquisition of SM Entertainment (hereafter SM). With this move, HYBE, which has been expanding its industry influence as the agency of the group BTS (Bangtan Sonyeondan), is on the verge of creating a top-tier planning company in the K-pop market.

Bang Si-hyuk, Chairman of HYBE.
[Photo by HYBE]

On the 10th, HYBE announced that it will acquire 14.8% of shares held by SM founder and largest shareholder Lee Soo-man for 422.8 billion KRW.

Lee Soo-man, the largest shareholder of SM with an 18.46% stake, will see HYBE become the largest shareholder of SM through this transaction. Earlier, Kakao announced on the 7th that it had secured a 9.05% stake in SM through a paid-in capital increase, but as this major shareholder sold shares to HYBE, the largest shareholder position changed hands instantly.

HYBE stated regarding this deal, "Lee Soo-man, former general producer of SM, and Bang Si-hyuk, chairman of HYBE, have joined hands to propel both companies as game changers in the global popular music industry," adding, "Through this, we aim to maximize the global competitiveness of K-POP and jointly achieve the vision of becoming a lifestyle platform company for future businesses."

HYBE, home to artists such as BTS, Seventeen, Tomorrow X Together, and NewJeans, will rapidly rise as an industry giant through this acquisition of SM. SM also boasts a large roster of global artists including TVXQ, Super Junior, SHINee, EXO, NCT, and aespa, making their merger signify the birth of a major IP company.

HYBE explained, "Chairman Bang, the founder and largest shareholder, and former SM general producer Lee Soo-man shared concerns about the future of K-pop and reached a consensus on ways to find solutions prior to signing this contract," adding, "One of the outcomes of this was the signing of the stock transfer agreement this week."

During this process, HYBE conveyed that Chairman Bang expressed respect for Lee Soo-man, who cultivated K-pop as an industry. HYBE also stated that it intends to continue realizing SM’s global vision as proposed by Lee Soo-man.

Former SM Chief Producer Lee Soo-man. [Photo by SM Entertainment]

Chairman Bang said, "HYBE fully agrees with the strategic directions Lee Soo-man has pursued, such as implementing the metaverse, establishing a multi-label system, and vision campaigns for saving the planet," and added, "We will leverage HYBE’s capabilities to further elevate K-pop’s status in the global market."

HYBE plans to actively improve the operational structure following the acquisition of SM. HYBE stated, "We have confirmed Lee Soo-man’s willingness to improve SM’s governance," and added, "(HYBE) already possesses top-level governance transparency through board-centered management and has led industry advancement with multi-label strategy operations and fandom platform development, so we will play an active role in improving SM’s governance."

Major shareholder Lee Soo-man also decided not to receive fees scheduled to be paid for three years after the termination of the contract between his personal producing company Like Planning and SM, as agreed with HYBE.

HYBE explained this as "a demonstration of the intention to improve SM’s governance," emphasizing, "Lee Soo-man also agreed to transfer his shares in SM affiliates held personally to HYBE, fully cooperating with the governance improvement efforts."

Furthermore, HYBE added that it plans to inject additional resources into improving SM’s governance through the reorganization of affiliate shareholdings.

Following the acquisition of the major shareholder’s stake, HYBE will proceed with a public tender offer for shares held by SM’s minority shareholders. The purchase price is planned at 120,000 KRW per share, the same as the major shareholder’s acquisition price, and HYBE currently has sufficient funds secured for the tender offer.

HYBE stated, "(The major shareholder) has expressed support for HYBE’s plan to conduct a public tender offer targeting SM’s minority shareholders."

This acquisition is expected to generate strong synergies by combining the accumulated capabilities of HYBE and SM across various business areas including labels and platforms.

Meanwhile, SM’s current management expressed opposition to a hostile M&A in an official statement on the same day. Attention is focused on what stance Kakao, which has become the second-largest shareholder, and HYBE, which has instantly become the largest shareholder, will take at the upcoming SM regular shareholders’ meeting scheduled for next month.