Appealing for Minority Shareholders' Support Ahead of the General Meeting
"A Historic Moment in Korean Entertainment Not to Be Missed"
Executives of SM Entertainment are reported to have sent a letter to minority shareholders requesting their support ahead of the shareholders' meeting scheduled for the end of this month. In the letter, the management appealed for support by stating, “The HYBE board will naturally allocate good songs and concert planning to Big Hit or ADOR.”
On the 1st, Yonhap News, citing sources in the music industry, reported that SM, which is engaged in a fierce management rights battle with its competitor HYBE, recently sent a letter titled “To the shareholders of SM Entertainment Co., Ltd.” to minority shareholders.
Letter sent by SM to minority shareholders ahead of the general meeting of shareholders [Image source=Provided by reader]
The front of the letter featured the phrase “An independent board for all shareholders, not specific shareholders, and a promise of a 1,200 KRW dividend per share,” along with a circle mark next to “(SM) Board Recommendation” and an X mark next to “Former Major Shareholder Lee Soo-man’s Proposal.”
SM notably drew attention by persuading shareholders through a separately attached Q&A document. In response to the question, “Wouldn’t it be good for SM if it were acquired by HYBE, which is larger and in the same industry?” SM answered, “Good trainees, good songs, good choreographers, and concert planning will be allocated first to HYBE’s subsidiary labels that hold a higher stake than HYBE’s shareholding in SM.” This means that Big Hit, home to BTS, and ADOR, which manages NewJeans, would inevitably have priority over SM.
They continued, “If HYBE holds up to 40% of SM’s shares and the remaining 60% are held by general shareholders, conflicts of interest between SM shareholders and HYBE shareholders will inevitably arise,” emphasizing that “HYBE is the largest competitor in the industry, competing closely with SM.”
SM also clarified the situation regarding Kakao’s opposition to HYBE’s 120,000 KRW tender offer and its support for the 90,000 KRW rights offering and convertible bond issuance. SM stated, “Kakao’s rights offering and convertible bond issuance account for only 9% in total, so it does not have management rights, and since its business areas hardly overlap with ours, we expect synergies that will enhance shareholder value,” adding, “This is for strategic collaboration with our company.”
In the letter, SM reiterated, “This incident is an unprecedented important event in the history of Korean entertainment,” and emphasized, “This year’s shareholders’ meeting is the last opportunity for SM, as an entertainment company with the best pool of domestic artists, to elevate its corporate value to the next level. The company’s future will change significantly depending on the shareholders’ decision this time.”
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