‘War of Money’ Hive acquires shares in SM… The point to watch is ‘Kakao Tender Offer’
Hive, the agency of the group BTS, acquired a stake in the agency SM Entertainment.
On the 10th, Hive announced that it would acquire 14.8% of the shares held by Soo-man Lee, the major shareholder of SM, for 422.8 billion won. The dispute over SM management rights sparked by Kakao’s acquisition of shares and the production reorganization plan that excluded former SM executive producer Lee Soo-man seemed to be coming to an end, but there is a possibility that the situation will reverse according to Kakao’s tender offer.
On the 9th, Hive announced that it would acquire 14.8% of Lee Soo-man’s largest shareholder’s stake at 120,000 won per share, and would make a tender offer for minority shareholders’ shares of up to 25% at the same price. Hive is expected to secure up to 40% of SM’s stake.
Hive said, “Prior to the signing of this contract, Chairman Bang Si-hyuk, the founder and largest shareholder, and former executive producer Lee Soo-man of SM shared their concerns regarding the future of K-pop and formed a consensus on how to find a solution.” The stock transfer contract has been signed,” he explained the background.
Of interest is Kakao’s strategy in the tender offer of Hive. If Hive succeeds in the tender offer, it can secure up to 40% of the shares, raising the possibility that SM’s management will pass to Hive.
In addition to this, Hive signed a put option contract for the remaining 3% of Lee’s shares. A put option is the right to sell shares at a pre-determined price at a specific time. It is a contract in which Hive must also purchase the remaining shares if requested by the largest shareholder following a certain period of time.
Kakao’s counterattack is also a point to watch. If Kakao starts to buy stocks, a vote competition will take place at the shareholders’ meeting in March.
On the 7th, Kakao announced a plan to secure a 9.05% stake through a paid-in capital increase and issuance of convertible bonds in partnership with SM’s current management. It is interpreted that the current management (co-representatives Lee Seong-soo and Tak Young-jun) joined hands with Kakao to exclude the largest shareholder, former general manager Lee Soo-man, from management.
Kakao decided to acquire 1.23 million new shares issued by SM in the form of a paid-in capital increase through a third party allocation, and to secure an additional 1.14 million shares in the future through convertible bonds. In this case, Lee Soo-man’s share will be lowered from 18.46% to 16.78%.
Former general manager Lee Soo-man filed an application for an injunction to prohibit issuance, saying, “Issuing new shares or convertible bonds to a third party is an infringement of the shareholder’s preemptive right.” If the application for provisional injunction is accepted, it will also put a brake on Kakao’s rise as the second largest shareholder.
Regarding this, Kakao (KS:) drew a line saying, “We are not currently planning to secure additional shares.”