SEOUL, March 12 (Reuters) – South Korean Okay-pop pioneer SM Leisure Co Ltd (041510.KQ) is poised to fall beneath the grip of social media large Kakao Corp (035720.KS) after HYBE Co Ltd (352820.KS), the company representing boy band BTS, on Sunday dropped a bid to take management.
WHY IS SM ATTRACTIVE?
SM, based in 1995 by South Korean people tune singer Lee Soo-man with simply 50 million received ($37,600) of capital, was the Okay-pop trade’s trailblazer, previous two rival companies – JYP Leisure (035900.KQ) and YG Leisure (122870.KQ) – that sprang up in later years.
For greater than twenty years, the Okay-pop trade was dominated by the trio till BTS rose to international fame in recent times, making its company HYBE the biggest music label within the nation.
SM, branded with Lee’s initials, is credited with setting the groundwork for Okay-pop’s international success, together with the primary breakthrough in 2002 when SM artist BoA topped Japan’s music charts.
After BoA’s achievement in Japan, different South Korean pop teams started abroad actions in earnest, beginning in Asia and later increasing to the U.S. and Western Europe.
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SM is residence to well-liked Okay-pop teams resembling Women’ Era, H.O.T., EXO, Pink Velvet, Tremendous Junior, SHINee, NCT Dream and Aespa.
It’s the second-largest leisure group in South Korea by market worth at $2.8 billion, trailing HYBE, which is value $5.5 billion.
FAMILY FEUD WITH ‘EMPEROR LEE’
Bigger-than-life Lee, 70, thought of the “godfather” of Okay-pop, has not assumed any official title at SM for years.
He as an alternative exerted his affect via a personal firm that he set as much as assist the trade’s international growth and supply administration and coaching providers.
Activist fund Align Companions, which owns about 1% of SM, final yr started demanding its administration staff, led by Lee’s nephew and protege Lee Sung-soo, lower enterprise ties with the founder, citing governance points and excessive charges paid to Lee’s non-public firm.
Frictions between SM and Lee got here to the fore final month when his nephew referred to as the founder “Emperor of SM Empire” in a YouTube video and criticised him for demanding unfavourable income sharing offers and undermining SM’s governance.
The nephew, 43, a 17-year-veteran of SM, mentioned he had knowledgeable Lee on Jan. 17 that any more he would make choices as CEO moderately than serving as a “rubber stamp”.
In response, Lee mentioned he was “harm” by his nephew’s phrases.
TAKEOVER BATTLE
In a bid to weaken the founder’s affect, SM’s administration introduced a $173 million share sale cope with Kakao final month that might make the tech group second-biggest shareholder after Lee, who remained the biggest with an 18% stake.
Lee filed an injunction request to dam the deal that was accepted by a court docket, and offered a 15% stake in SM to rival company HYBE, organising a takeover battle.
HYBE launched a public tender supply to purchase an extra 25% stake, however obtained little shareholder assist.
Kakao, which owns round 5% of SM, upped the ante this month, launching a young supply at the next value to amass as much as 35% for 1.25 trillion received ($946.80 million).
HYBE mentioned on Sunday its determination to halt the takeover bid got here after the inventory market had been exhibiting “indicators of overheating as a result of competitors.”
HOW DOES THE ACQUISITION HELP KAKAO?
SM is perceived as a uncommon high quality asset up for grabs due to the administration dispute and Lee’s determination to relinquish his stake.
Kakao, the preferred social media platform in South Korea, is increasing aggressively into the leisure trade the place it already owns a smaller Okay-pop company, Starship Leisure.
In January, Kakao Leisure introduced a 1.2 trillion received ($966.27 million) funding from Singapore’s GIC and Saudi Arabia’s Public Funding Fund, giving it extra firepower for the SM bid.
Management of SM would bolster Kakao Leisure’s plans for an preliminary public providing, analysts mentioned.
($1 = 1,327.9200 received)
Reporting by Hyunsu Yim; Modifying by Miyoung Kim and Jamie Freed
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