K-pop agency SM Entertainment reveals position vs HYBE’s ‘hostile takeover’; warns of monopoly

On Feb. 20, SM Entertainment uploaded a video titled “The reason why SM is against HYBE’s hostile takeover” with Chief Financial Officer Cheol Hyuk Jang explaining why they are opposed to HYBE’s entry into the company.

This gave HYBE a 14.8 percent stake in SM Entertainment to become the largest shareholder of the company. The expected acquisition date is on March 6.In the latest video, SM Entertainment’s Cheol Hyuk Jang said HYBE’s takeover over the company would create a monopoly and reduce SM’s corporate value and stock price.According to Cheol Hyuk Jang, “On February 3, we SM, took the first step toward our new leap forward for our fans, artists, shareholders and employees, by announcing ‘SM 3.

According to Cheol Hyuk Jang, “We know better than anyone else that under such a governance structure, it is difficult to make decisions that prioritize the value of all SM shareholders, including the remaining 60%.” “It is considered a common sense and normal practice in the case of an M&A deal this size to undergo a financial audit or legal due diligence based on the data provided by the target company for merger before any purchasing agreement is signed. In this regard, we think that HYBE’s corporate governance is far from sound or rational. If HYBE takes over SM, it is inevitable that SM will be subject to such weak governance,” he said.

“HYBE currently has a separate business unit that monetizes IP held by its affiliated labels. This means HYBE, not SM, would take the initiative in operating the SM-owned IP and SM’s future profits would be subordinate to HYBE. HYBE says it will acquire former executive producer Soo-Man Lee’s stakes in SM Brand Marketing as well as his shares in DREAM MAKER. It insists that this aims at improving SM’s governance structure.

The CFO said, “A lot of indicators of market share imply that HYBE’s acquisition of SM will undermine fair competition, which clearly shows that this acquisition is unfair. In the Korean entertainment market, the artists have put in their highest endeavors while the entertainment agencies have engaged in constructive competition. This has enabled K-pop to achieve its current global popularity and fandom.

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