Hybe Co Unveils Plans to Acquire Majority Stake in SM Entertainment

UTC by Godfrey Benjamin · 3 min read
Hybe Co Unveils Plans to Acquire Majority Stake in SM Entertainment
Photo: SMTOWN / Twitter

As the founder of SM Entertainment, Lee Soo-man owns 18.45% shares of the company.

South Korean entertainment giant Hybe Co Ltd (KRX: 352820) has revealed through a regulatory filing that it plans to acquire a 14.8% stake in SM Entertainment owned by Lee Soo-man. Lee is the founder of its smaller rival SM Entertainment which has shaped pop culture in the country and in all of Asia.

The agreement to acquire the stake from Lee Soo-man has a clause to be completed by March this year according to the filing. Hybe Co also revealed in a separate filing that it also plans to buy up another 25% of the company. Should these buy-ups be completed, it will present the company as the largest shareholder in SM Entertainment.

While the global economy has continued to experience an immense strain across the board, entertainment has shown a great deal of immunity. Consumers in South Korea and around the world have grown a unique appetite for entertainment services, and as such, this presents a unique opportunity for Hybe Co to diversify its reach in the industry.

According to Hybe Co, its planned investments in SM Entertainment are targeted at raising the competitiveness in the K-pop industry as well as creating a synergistic effect on all players. The company. As it revealed, it is now buying as much as 3.5 million shares of SM Entertainment at 422.8 billion won ($334.2 million).

This buyup is pegged at about 120,000 won per share at a premium of more than 20% compared with SM Entertainment’s closing price of 98,500 won as of Thursday’s market close. As of the time of writing, SM Entertainment’s stock has grown remarkably in response to the share acquisition news.

The stock is up 16.45% to 114,700 Korean Won. The shares of Hybe Co are slightly down by 1.51% to 195,300 won respectively.

Highlighting Hybe Co’s Interest in SM Entertainment

As the founder of SM Entertainment, Lee Soo-man owns 18.45% shares of the company. According to its latest filing, the firm also has other top investors including the National Pension Service, KB Asset management, and Norway’s Norges Bank Investment Management.

SM Entertainment has earned a unique reputation for itself for backing successful K-pop artists from Korea. The firm is the entertainment brand backing the rising girl group, NewJeans. This group’s masterpiece “Ditto” was featured on Billboard’s Hot 100 back in January. This feat was achieved by the team in just about 6 months since coming into the limelight.

SM Entertainment’s attractiveness was not highlighted by the NewJeans group. The company is also the sponsor of top bands including but not limited to Super Junior, Girls’ Generation, and Red Velvet. Red Velvet, under President Moon Jae-in performed in a joint meeting between North and South Korea back in 2018.

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