[주간한국 장서윤 기자] The ‘War of Money’, which lasted for regarding a month over the acquisition of SM Entertainment (hereinfollowing referred to as SM), ended with Kakao’s victory. As Kakao and Hive engaged in a tender offer for SM stocks, and the acquisition price soared, Hive, considering the actual profits, suddenly announced the suspension of the SM acquisition process on the 12th.
Although the management right was in the arms of Kakao, in this dispute, Hive and former producer Lee Soo-man are evaluated as having obtained satisfactory results. Hive is able to obtain a profit of 100 billion won when collaborating with a large platform called Kakao and selling its stake.
The former producer, who had already handed over management rights, secured a premium of over 400 billion won by handing over his shares to Hive. Without the ‘winner’s curse’, it seems that all the subjects of the management dispute have been settled at the level of securing their cards.
But the challenges are also stacked. First of all, legal risks remain, such as the Fair Trade Commission’s business combination review targeting Kakao instead of Hive and the Financial Supervisory Service’s investigation into SM stock price manipulation charges. It is also a matter of interest how Hive, now the largest shareholder in SM, will dispose of its 15.8% stake in SM.
Hive, Lee Soo-man also laughed at the end
Kakao, tender offer at 150,000 won by the 26th
Kakao plans to make a tender offer for a 35% stake in SM (8,333,641 shares) by the 26th for a total of 1.25 trillion won at 150,000 won per share. This is 60% higher than the acquisition amount that Kakao originally expected.
Previously, SM had planned to secure regarding 9% of SM shares at a price of 90,000 won, but as the stock market overheated, Kakao, which acquired SM, had to spend regarding 500 billion won additionally. Considering that it has already secured a 5% stake in SM, Kakao’s stock acquisition cost is 1.3 trillion won. Some have pointed out whether Kakao has enough funds, but Kakao is in the position that it has room.
As of the end of December last year, Kakao’s cash holdings on a consolidated basis were regarding 4.8 trillion won. Kakao explained that if short-term financial products of regarding 1.2 trillion won are added to this, it has regarding 6 trillion won in cash assets. In addition, at the beginning of the year, it raised 1.15 trillion won in funds from Saudi sovereign wealth funds and others.
However, the legal risk is a mountain that must be overcome first. Currently, Kakao holds a 4.9% stake in SM. When the tender offer scheduled for the 26th is completed, Kakao’s stake in SM will be 39.91%. According to the current Fair Trade Act, when a company with assets or sales of 300 billion won or more acquires 15% or more of the stocks of a listed company with assets or sales of 30 billion won or more, it must report the business combination to the FTC.
Since the end of February, the Fair Trade Commission has already tentatively determined that Kakao or Hive’s acquisition of SM was subject to business combination review and entered into an internal review. Usually, the Fair Trade Commission starts reviewing following receiving a report, but this case was reviewed in advance because it is expected that sharp issues will arise with the addition of giant entertainment companies and big tech companies.
The Fair Trade Commission closely examines whether Kakao and SM both abused their monopoly position and restricted market competition following the merger, and may take corrective measures if necessary.
Another variable is that the financial authorities have been monitoring the dispute since last month, when the SM takeover battle intensified. The Financial Supervisory Service is reviewing violations of the Capital Market Act that occurred during the SM management rights dispute between Kakao and Hive.
The Financial Supervisory Service ▲ Circumstances in which an anonymous corporation acquired 2.9% of SM shares following Hive announced plans to tender offer SM stocks at 120,000 won last month ▲ Kakao’s purchase of 4.42% of SM shares at 120,000 won per share on February 28, etc. It is a position to review whether this is in violation of the Capital Markets Act.
Kakao, wing Dana to expand global business
Where is the direction of Hive’s stake in SM?
Legal risks remain, but the market’s evaluation is that Kakao has become a ‘winner without a curse’.
In fact, if ‘SM 3.0’, which is Kakao’s SM management roadmap and SM’s future plan announced earlier this year, is achieved, SM’s sales this year are expected to be KRW 1.342 trillion and operating profit to be KRW 170.6 billion. With a tender offer of 150,000 won, SM’s corporate value reaches 3.9 trillion won.
Kim Ha-jeong, a researcher at Daol Investment & Securities, said, “Kakao is judged to have acquired SM at an attractive price even considering the management premium.” “Kakao can also aim for global expansion through SM. In particular, even if the fan platform function is added to KakaoTalk, KakaoTalk users will be able to grow significantly around the world.”
When Hive sold its stake in SM during Kakao’s tender offer, it might make a profit of over 100 billion won. Earlier, Hive bought a 14.8% stake (3,523,420 shares) from Lee Soo-man at 120,000 won per share. Considering that the tender offer price proposed by Kakao is KRW 150,000, a profit of regarding KRW 112.8 billion will occur.
Bang Shi-hyeok, Chairman of Hive, attended the discussion at the Kwanhun Forum held on the 15th and said, “We will decide the direction of SM shares, which are approximately 15.8% owned by Hive, through discussions with the acquisition team.” I want to choose,” he replied theoretically.
In addition, regarding the content of ‘platform cooperation’ with Kakao, which is attracting public attention, he said, “We are preparing to become a practical cooperation in the near future,” and “I will show you soon.”
