By Hyunsu Yim
SEOUL (Reuters) -South Korean social media giant Kakao’s stake in K-pop agency SM Entertainment has reached 40%, the target said on Tuesday, in a deal that has left former bidder HYBE stuck with more than half of its stake in SM.
HYBE, the manager of hit boy band BTS, had hoped to sell its entire 15.8% stake into a tender offer from Kakao Corp and affiliate Kakao Entertainment after losing a battle for control of the pioneering K-pop agency.
But Kakao’s tender offer for a 35% stake at 150,000 won per share attracted acceptances for more than double the targeted stake, forcing it to scale back allotments in proportion.
HYBE said it was left with an 8.81% stake in SM. Shares of SM closed at 94,300 won on Tuesday afternoon, leading to a paper loss of about 4.2 billion won ($3.23 million) for HYBE, according to Reuters’ calculation.
It had bought its stake for 120,000 won per share, mostly from SM founder Lee Soo-man, who is considered the “godfather” of the K-pop industry.
If HYBE had been able to sell its entire stake into Kakao’s offer, it stood to pocket a gain of around $87 million, a 25% quick return from an investment made just a month ago.
Kim Hyun-yong, an analyst at Hyundai Motor Securities, said maintaining the remaining stake in SM could help HYBE contain Kakao in the long run. The South Korea tech giant has become HYBE’s biggest rival in the K-pop industry after becoming SM’s largest shareholder.
“Remaining as a major shareholder with more than a 5% stake would be a good move in containing (the rivals) despite not being able to exercise great influence over decision-making,” he said.
HYBE plans a substantial number of acquisitions and investments this year as the K-pop giant looks to boost its U.S. presence, its chairman Bang Si-hyuk said this month.
SM is home to popular K-pop groups such as Girls’ Generation, H.O.T., EXO, Red Velvet, Super Junior, SHINee, NCT Dream and Aespa.
($1 = 1,298.9400 won)
(Reporting by Hyunsu Yim and Joyce Lee; Editing by Jamie Freed and Jacqueline Wong)
