South Korean music company Hybe has confirmed that it is bailing on its bid to acquire a controlling stake in rival K-pop powerhouse SM Entertainment. The decision seemingly follows a meeting on Friday attended by key execs from both Hybe and SM, as well as Kakao, the internet firm which is also buying up SM shares.
Kakao – which has its own entertainment division and also operates streaming service Melon – originally agreed a deal with the SM management team to buy newly issued shares in that business. But that proposal was opposed by SM’s founder and until recently biggest shareholder Lee Soo-man.
He went legal in a bid to block the issuing of any new SM shares while also bringing Hybe into the mix. He confirmed that if SM was to form any alliance with a competitor, he’d prefer it to be Hybe rather than Kakao. To that end he sold most of his SM shares to Hybe, which then also announced a plan to increase its SM shareholding to 40%.
The grand plan conceived by Lee and Hybe seem to be gaining momentum when, earlier this month, the courts in South Korea sided with the SM founder and blocked the issuing of any new SM shares. The original deal between SM management and Kakao was then called off.
However, shortly after that Kakao announced that – like Hybe – it was now interested in buying stock from other existing SM shareholders. And Kakao was offering a share purchase price higher than that offered by Hybe.
Analysts predicted that Hybe wouldn’t want to – and couldn’t afford to – enter into a price war with Kakao. And this weekend that was basically confirmed, with Hybe stating that it was “halting the acquisition process for SM Entertainment” because Kakao’s rival bid had pushed the the acquisition price “above the appropriate range”.
According to the Korea JoongAng Daily, following last week’s meeting, Hybe will get some kind of “platform deal” with SM, though the specifics of that are not known. Hybe also seemingly hasn’t yet decided what to do with the SM shares it recently acquired, it currently owning 15.78% of the company. It might sell those shares to Kakao or may retain its interest in the rival firm.