[SM Management Battle] Kakao Officially Joins... Small Shareholders Hold the 'Kkotnori Card'

SM Stock Price Soars to Kakao's Tender Offer Price
Kakao Separately Secures 4.9% Stake in SM through On-Exchange Purchases

Kakao officially entered the SM Entertainment (SM) management rights dispute by declaring a public tender offer at 150,000 KRW per share. This price is 25% higher than the 120,000 KRW per share offered by HYBE in last month's tender offer. Currently holding a 4.9% stake through on-market purchases, Kakao plans to acquire an additional 35% stake through the public tender offer. Kakao will invest 1.25 trillion KRW in the tender offer.

On the 7th, Kakao announced, "We will conduct a public tender offer at 150,000 KRW per share for the shares held by SM's minority shareholders," adding, "This tender offer, which runs from the 7th to the 26th, is open to all SM shareholders." Kakao further stated, "We have established strategic business cooperation, believing that we are the optimal partners to grow together with competitiveness comparable to major global entertainment companies. However, as the current business cooperation and the mid- to long-term growth directions of the three companies (SM, Kakao, Kakao Entertainment) are being threatened, we have determined that securing the status of the largest shareholder is inevitable." They added, "We have strong trust in the outstanding competitiveness of SM's current management, employees, and artists," emphasizing, "We respect the current management's efforts to resolve factors hindering SM's growth and the future vision and strategic direction, including SM 3.0." They also stated, "Even after becoming the largest shareholder, Kakao plans to respect SM's originality and guarantee independent operation."

HYBE's Response in Focus... Three Possible Cards to Play

HYBE stated that further tender offers require discussion and that they respect Kakao's intentions. Previously, HYBE collected only 233,817 shares (0.98%) in the SM tender offer that ended on the 1st, falling far short of the 25% target. Including shares purchased from former SM Chief Producer Lee Soo-man last month, HYBE holds a total of 15.78%. Including the remaining 3.65% of shares delegated by Lee, the total is 19.43%.

With Kakao officially entering the fray by declaring a tender offer at a higher price than HYBE, attention is focused on HYBE's countermeasures. HYBE has three main options: to launch another tender offer at a price higher than Kakao's, to accept Kakao's tender offer, or to remain the second-largest shareholder and cooperate with Kakao.

Some industry insiders predict that HYBE may launch another tender offer at a price higher than 150,000 KRW. Recently, HYBE selected Morgan Stanley as the lead underwriter and began raising up to 1 trillion KRW in investment. Rather than engaging in a 'price war' through tender offer prices, there is also a possibility that HYBE will respond to Kakao's tender offer. Additionally, a scenario where HYBE and Kakao each hold stakes and cooperate can be considered. A senior HYBE official said, "The Morgan Stanley funds are not for acquiring SM," adding, "Further tender offers require discussion, and we respect Kakao's intentions."

SM Stock Price Soars Following Kakao's Entry

On the same day, SM's stock price soared, approaching the tender offer price proposed by Kakao. As of 9:38 AM, the stock rose 16,900 KRW (12.99%) from the previous day to 140,700 KRW. The securities industry views the structural improvement expected regardless of who acquires SM as positive. It is anticipated that management will be replaced following HYBE's acquisition and that relationships with subsidiaries will normalize. Along with expectations of increased corporate value, the intensifying management rights dispute is expected to keep the stock price on a high trajectory for the time being. For minority shareholders, accepting Kakao's tender offer at 150,000 KRW per share means selling at roughly double the price from the beginning of the year (75,200 KRW).

This content was produced with the assistance of AI translation services.