Kakao "Regret Hive Distortion... Will Explore All Measures"

Kakao, which is engaged in a battle of nerves with HYBE over the acquisition of SM Entertainment, has issued its first official statement. It expressed regret toward HYBE and stated that it will explore all necessary measures.

On the 27th, Kim Sung-soo, Co-CEO of Kakao Entertainment, said, "Kakao, Kakao Entertainment, and SM Entertainment have formed a strategic partnership based on the business competitiveness each of the three companies possesses to create horizontal synergy and a virtuous cycle. In the rapidly changing global corporate environment, we judged that combining technology and global IP to build competitiveness comparable to that of major global entertainment companies and growing together makes us the optimal partners for each other. This is the result of multifaceted discussions based on each company's growth vision and business direction over a long period."

Earlier, HYBE criticized the cooperation agreement among Kakao, Kakao Entertainment, and SM Entertainment, claiming it damages shareholder value and cannot be seen as a horizontal cooperative relationship.

CEO Kim rebutted, "The business cooperation agreement is a comprehensive contract that encompasses the future vision and direction that the three companies will achieve together. The detailed provisions will be derived through consultations for each business to create a win-win structure for each company, and based on this, we plan to sign a contract under fair conditions."

He added, "The right of first negotiation stated in the convertible bond subscription contract is merely an anti-dilution clause typically held by minority shareholders. HYBE's claims that the three-party business cooperation agreement harms existing shareholders' interests are not true. We express regret toward HYBE for distorting some phrases in the contract in a way favorable to themselves, causing unnecessary confusion."

Having remained reserved without any special statements until now, Kakao announced it will take proactive measures going forward.

CEO Kim claimed, "On the 21st, HYBE took the position that collaboration with Kakao was possible regarding the three-party business cooperation agreement, but on the 24th, they suddenly reversed their stance and instructed SM Entertainment’s management to halt all detailed decision-making related to the main contract." He continued, "They are recommending board members composed solely of HYBE personnel, denying both the existing management and the direction they established."

He said, "We can no longer just watch the current situation, which threatens the very existence of the partnership with SM Entertainment and fundamentally infringes on the mid- to long-term growth direction of the three companies. We judge that a complete revision of the existing strategy is inevitable, and accordingly, Kakao Entertainment will closely consult with Kakao and actively explore all necessary measures."