A South Korean activist fund with a key stake in K-Pop agency SM Entertainment Co. is pushing BTS manager Hybe Co. to raise the price of its bid and take full control of the smaller K-pop label, raising the prospect of a price-bidding war.
(Bloomberg) — A South Korean activist fund with a key stake in K-Pop agency SM Entertainment Co. is pushing BTS manager Hybe Co. to raise the price of its bid and take full control of the smaller K-pop label, raising the prospect of a price-bidding war.
Hybe, the No. 1 K-pop agency with New Jeans and other popular groups, launched a hostile bid for close to 40% of shares of SM, coming to the aid of founder Lee Soo-man as he fights to block SM’s deal with Kakao Corp. Hybe’s offering 120,000 won per share, for a total of 1.14 trillion won ($900 million).
That price is too low, Lee Changhwan, chief executive officer at Align Partners Capital Management, adding that he expects SM’s operating profit to triple in three to five years during an interview with Bloomberg News. A partial stake would also lead to confusion and lower morale at SM, the manager of Girls’ Generation, he said. SM executives issued a statement opposing Hybe’s offer.
“If Hybe takes 40% and tries to control the board, there could be problems,” Align’s Lee said. “I am concerned that will undermine the morale of artists.”
Align’s Lee was nominated to SM’s board, which last week announced plans for an issue of new shares to Kakao. That 217 billion won proposal — backed by Align — would have made Kakao the second-biggest shareholder in SM and diluted founder Lee’s control over the company. That deal is pending shareholders approval.
Read: Godfather of K-Pop Teams Up With BTS Label to Battle Activists
Align holds a 1% stake in SM, CEO Lee said. It launched a campaign to reform corporate governance at the K-pop agency about a year ago. SM’s management has agreed to accept Align’s proposals including establishing committees to improve corporate governance and boost shareholder returns.
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