SM Entertainment Co. plunged after BTS label Hybe Co. said it would back down from a battle over the smaller K-pop agency, ending a bidding war with internet giant Kakao Corp. that had embroiled some of the biggest names in Korean entertainment.
(Bloomberg) — SM Entertainment Co. plunged after BTS label Hybe Co. said it would back down from a battle over the smaller K-pop agency, ending a bidding war with internet giant Kakao Corp. that had embroiled some of the biggest names in Korean entertainment.
SM shares fell as much as 22% during Monday morning trade, to below Kakao’s tender offer price of 150,000 won. Hybe and Kakao both rallied by more than 7%, before paring gains. Shares of both were up around 2%. Smaller entertainment rivals also dropped.
Hybe had faced off with internet giant Kakao Corp. for a controlling stake in SM — a pioneer that first brought K-pop outside Korea. Both saw SM as key to reaching a broader audience and drive K-pop into the mainstream. Their bidding war almost doubled SM’s stock price to a record last week. But after Kakao launched its tender offer at a premium to Hybe’s, Hybe said over the weekend it would halt its bid for control of SM.
Shares of other K-pop agencies are also falling. JYP Entertainment Corp. fell as much as 9.5%, the most since March 2020, while YG Entertainment Inc. shed about 7%.
The end of the takeover battle is affecting overall investor sentiment toward entertainment stocks, said Hyungjin An, chief executive officer at Billionfold Asset Management. “SM was receiving high valuations during the takeover battle that also helped push up the value of other entertainment stocks.”
Hybe’s withdrawal clears the way for SM’s plan to tie up with messaging app operator Kakao, which plans to shore up its K-pop offerings at Kakao Entertainment Corp. and boost traffic to its platform.
Kakao and its entertainment unit will continue with their tender offer to increase their holding in SM by Mar. 26, and will boost business cooperation with both Hybe and SM, Kakao said in a separate e-mailed statement over the weekend. Hybe and SM agreed to cooperate in matters related to their platforms, the two said.
Nothing has been decided on Hybe’s current stake in SM, Hybe said in an emailed statement to Bloomberg News.
Hybe has agreed to withdraw its internal director recommendations for SM’s board, but it is in discussion on outside directors, it said in the statement.
SM said in a separate statement that it respects the decision, and will continue to expand shareholder returns and improve corporate values.
(Updates share price from third paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.