![\"Entertainment\"](\"https:\/\/www.digitalmusicnews.com\/wp-content\/uploads\/2022\/04\/Seoul-Main-2.jpg\" "\\"Entertainment\\"")
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Seoul, South Korea. Photo Credit: Mathew Schwartz<\/p>\n<\/div>\n
Entertainment As it looks to secure a controlling stake in SM Entertainment despite strong opposition, Hybe has rolled out an \u201cSM with Hybe\u201d campaign. Meanwhile, with Kakao working to purchase a piece of SM as well, a court has approved a motion to stop the issuance of new shares and convertible bonds. <\/strong><\/h2>\nAbout one week ago, Seoul-headquartered Hybe (KRX: 352820) formally bought<\/a> nearly 15 percent of SM Entertainment (KRX: 041510) in a deal with the company\u2019s founder and former chief producer, Lee Soo-man. The high-profile investment arrived shortly after Hybe acquired Quality Control<\/a> and emphasized its ambitious global-expansion plans.<\/p>\nHowever, SM execs (and fans) promptly pushed back against<\/a> the deal and Hybe\u2019s intention of obtaining a 40 percent controlling interest, including by speaking out against the \u201chostile takeover\u201d in a lengthy video. And the entertainment division of Kakao (KRX: 035720), having pulled down<\/a> around $1 billion in new funding in December, announced an agreement to buy roughly nine percent of SM.<\/p>\nAs part of said agreement, Kakao and SM would establish a U.S. joint venture, and the latter entity reportedly intended to finalize an exclusive distribution tie-up with the former company. Hybe is challenging the overarching deal in court \u2013 a move that appears to have been successful \u2013 including because the pact would allegedly enable Kakao to buy additional SM stock before other shareholders could do so, thereby diluting their respective stakes.<\/p>\n
Of course, SM has refuted this assessment, and Hybe is now expanding upon previously issued public remarks about the situation \u2013 and looking to obtain control of SM\u2019s board \u2013 under the initially mentioned \u201cSM with Hybe\u201d effort. <\/strong><\/h4>\n\u201cLet\u2019s win together!\u201d reads text featured on the homepage of the campaign\u2019s website, which Hybe has made available in both Korean and English. Beyond this and similarly enthusiastic statements pertaining to the potential control of SM, though, the multifaceted digital resource lays out in detail Hybe\u2019s plans for the operation.<\/p>\n
Specifically, Hybe says that it would appoint directors and auditors \u201cto ensure SM Entertainment\u2019s management expertise, transparency, and shareholder value enhancement,\u201d revise the articles of incorporation to \u201cresolve governance-related issues and promise sustainable growth,\u201d and implement \u201ccompensation policies for responsible management.\u201d<\/p>\n
Elaborating upon these points, Hybe has also published a 44-page document<\/a> charting the sweeping proposal that it intends to deliver to fellow SM shareholders during a general meeting on March 31st. <\/strong><\/h4>\n\u201cWe sincerely ask for your support of our shareholder proposal at SM Entertainment\u2019s (\u2018SM\u2019) 28th Shareholders\u2019 Meeting, to replace the unethical and ineffective management to those who can actually contribute to SM\u2019s growth into a global entertainment company,\u201d the text reads in part.<\/p>\n
From there, the all-encompassing (and firmly worded) resource takes aim at SM\u2019s CFO (who\u2019s said to be \u201cjointly accountable for the devaluation of SM due to poor management despite its rich IP resources\u201d) and the \u201coverly large\u201d board size, before describing the purported advantages of its suggested directors (from Hybe\u2019s executive team) compared to those put forward by SM.<\/p>\n
(Interestingly, a portion of the voluminous presentation likewise compares the \u201ccombined equity value\u201d
of SM and Hybe directly with those of the major labels, BMG, Concord, and others. Green-lighting the business combination would represent \u201ca meaningful step towards\u201d nearing the value of the \u201cglobal top 3 music groups,\u201d per Hybe.)<\/p>\n
Finally, Hybe CEO Ji-Won Park has personally penned proposals to SM shareholders,<\/a> summarizing the points explored in the 44-page presentation, and his company has gone ahead and debuted a press center for \u201cSM with Hybe\u201d itself. <\/strong><\/h4>\nIn said press center\u2019s latest release, Hybe indicated that the Seoul Eastern District Court had \u201cgranted a provisional injunction to prohibit the issuance of new shares and convertible bonds in SM Entertainment\u201d as part of a case brought forward by the above-noted Lee Soo-man.<\/p>\n
\u201cThis decision will suspend the illegal attempts committed by SM\u2019s current management,\u201d Hybe wrote, \u201cas a means to influence the controlling rights of SM. With this result, everything should now fall back into place.\u201d<\/p>\n<\/section><\/div>\n
However, SM execs (and fans) promptly pushed back against<\/a> the deal and Hybe\u2019s intention of obtaining a 40 percent controlling interest, including by speaking out against the \u201chostile takeover\u201d in a lengthy video. And the entertainment division of Kakao (KRX: 035720), having pulled down<\/a> around $1 billion in new funding in December, announced an agreement to buy roughly nine percent of SM.<\/p>\n As part of said agreement, Kakao and SM would establish a U.S. joint venture, and the latter entity reportedly intended to finalize an exclusive distribution tie-up with the former company. Hybe is challenging the overarching deal in court \u2013 a move that appears to have been successful \u2013 including because the pact would allegedly enable Kakao to buy additional SM stock before other shareholders could do so, thereby diluting their respective stakes.<\/p>\n \u201cLet\u2019s win together!\u201d reads text featured on the homepage of the campaign\u2019s website, which Hybe has made available in both Korean and English. Beyond this and similarly enthusiastic statements pertaining to the potential control of SM, though, the multifaceted digital resource lays out in detail Hybe\u2019s plans for the operation.<\/p>\n Specifically, Hybe says that it would appoint directors and auditors \u201cto ensure SM Entertainment\u2019s management expertise, transparency, and shareholder value enhancement,\u201d revise the articles of incorporation to \u201cresolve governance-related issues and promise sustainable growth,\u201d and implement \u201ccompensation policies for responsible management.\u201d<\/p>\n \u201cWe sincerely ask for your support of our shareholder proposal at SM Entertainment\u2019s (\u2018SM\u2019) 28th Shareholders\u2019 Meeting, to replace the unethical and ineffective management to those who can actually contribute to SM\u2019s growth into a global entertainment company,\u201d the text reads in part.<\/p>\n From there, the all-encompassing (and firmly worded) resource takes aim at SM\u2019s CFO (who\u2019s said to be \u201cjointly accountable for the devaluation of SM due to poor management despite its rich IP resources\u201d) and the \u201coverly large\u201d board size, before describing the purported advantages of its suggested directors (from Hybe\u2019s executive team) compared to those put forward by SM.<\/p>\n (Interestingly, a portion of the voluminous presentation likewise compares the \u201ccombined equity value\u201d In said press center\u2019s latest release, Hybe indicated that the Seoul Eastern District Court had \u201cgranted a provisional injunction to prohibit the issuance of new shares and convertible bonds in SM Entertainment\u201d as part of a case brought forward by the above-noted Lee Soo-man.<\/p>\n \u201cThis decision will suspend the illegal attempts committed by SM\u2019s current management,\u201d Hybe wrote, \u201cas a means to influence the controlling rights of SM. With this result, everything should now fall back into place.\u201d<\/p>\n<\/section><\/div>\nOf course, SM has refuted this assessment, and Hybe is now expanding upon previously issued public remarks about the situation \u2013 and looking to obtain control of SM\u2019s board \u2013 under the initially mentioned \u201cSM with Hybe\u201d effort. <\/strong><\/h4>\n
Elaborating upon these points, Hybe has also published a 44-page document<\/a> charting the sweeping proposal that it intends to deliver to fellow SM shareholders during a general meeting on March 31st. <\/strong><\/h4>\n
of SM and Hybe directly with those of the major labels, BMG, Concord, and others. Green-lighting the business combination would represent \u201ca meaningful step towards\u201d nearing the value of the \u201cglobal top 3 music groups,\u201d per Hybe.)<\/p>\nFinally, Hybe CEO Ji-Won Park has personally penned proposals to SM shareholders,<\/a> summarizing the points explored in the 44-page presentation, and his company has gone ahead and debuted a press center for \u201cSM with Hybe\u201d itself. <\/strong><\/h4>\n