HYBE, CJ, and Kakao Entertainment Reportedly Competing To Acquire Lee Soo Man's Shares In SM Entertainment

On August 3, it was reported that HYBE, CJ, and Kakao Entertainment are in the race for Lee Soo Man’s shares in SM Entertainment.

Lee Soo Man holds approximately 18.73 percent of the shares in SM Entertainment, making him the company’s largest shareholder. It is believed that whoever acquires his shares will be gaining SM Entertainment’s management rights.

According to Hankook Kyungje, HYBE, CJ, and Kakao Entertainment jumped into the acquisition battle of SM Entertainment and are presenting various scenarios to the company in order to win.

Previously, SM Entertainment stated, “There are various discussions on business partnership and equity investment, but nothing has been finalized so far.”

Kakao Entertainment, which is currently the most likely to acquire the shares, reportedly proposed to acquire SM Entertainment and its management rights at a value of more than 2.5 trillion won (approximately $2.2 billion). Much of the discussion is between Lee Soo Man and Kim Bum Soo, Kakao Entertainment’s chairman and largest shareholder.

However, CJ is considered a dark horse that can threaten Kakao Entertainment’s opportunity to acquire SM Entertainment. It was reported that CJ’s vice chairman Lee Mi Kyung has decided to return to Korea to meet with Lee Soo Man.

Another strong candidate is HYBE. The label offered SM Entertainment a higher amount than Kakao Entertainment, but the deal was reportedly not successful as Lee Soo Man rejected the proposal.

Industry representatives predict that the acquisition amount will increase from 2.5 trillion won to 4 trillion won (approximately $3.5 billion) at most. They also speculate that foreign investors, such as Morgan Stanley, are competing to increase their shares in SM Entertainment.

Currently, SM Entertainment has a market capitalization of 1.38 trillion won (approximately $1.2 billion), which is only one tenth of HYBE’s market capitalization of 11.3 trillion won (approximately $9.9 billion). However, it is believed that SM Entertainment continues to perform well in both domestic and foreign markets and that its stock prices are undervalued.

A source from the financial investment industry said, “With Lee Soo Man showing desire to ‘take his hands off [of SM Entertainment]’ and rumors of him selling his shares in SM Entertainment, several companies are being mentioned. As SM Entertainment’s second-quarter performance is predicted to be beyond expectations, the value of SM Entertainment will be high.”

As of 2:18 p.m. KST on August 4, SM C&C’s stock price has risen 1,055 won (approximately 92 cents), and the shares are trading at 6,000 won ($5.25). SM C&C is an affiliate of SM and a comprehensive entertainment media group that produces videos, such as movies and TV programs.

At the same time, SM’s stock price rose 6,400 won (approximately $5.60), and the shares are trading at 69,100 won (approximately $60.44). In addition, the stock price of SM Life Design, which is a printing business that creates products like albums, rose 230 won (approximately 20 cents), and the shares are trading at 3,560 won (approximately $3.11).

Sources (1) (2)