K-Pop

Despite SM’s opposition, HYBE continues to proceed with the tender offer as planned

Although SM is against their M&A and tender offer plan, HYBE maintains the position of purchasing SM’s stake with the proposed tender price of 120,000 won.

On February 20th, SM revealed their position on HYBE’s hostile takeover attempt, saying “HYBE’s tender offer is unilaterally conducted under a separate agreement with SM’s former largest shareholder without prior consultation or discussion with SM’s current management and board. This tender offer disparages the efforts of SM artists, executives, and employees who have contributed to making SM a leading K-pop entertainment company.”, adding, “Therefore, we are against this tender offer”.

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Earlier, HYBE announced that they would purchase up to 25% of SM shares from minor shareholders for 120,000 won per share by February 28th after securing 14.8% stake from SM’s former executive producer Lee Soo Man.

SM emphasized, “Our company announced the ‘SM 3.0’ strategy to share our new vision and future. The shareholders and investors agree and raise expectations for SM’s future. The stock prices have also been rising steadily since then”, adding, “This tender offer is contrary to SM’s core business strategy and will negatively affect SM’s corporate value”.

On Feb 20th, SM’s CFO Jang Cheol Hyuk expressed SM’s opposition to HYBE’s “hostile takeover” in detail through SM’s official YouTube channel. CFO Jang claimed, “This is clearly a ‘hostile takeover attempt’ that has not been consulted with the current management and board. 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. This is the same as returning to the wrong past of ‘SM for a certain shareholder’.”

CFO Jang continued, “I would like to talk about the problems found in the process of the hostile takeover. During HYBE’s SM share purchase process, purchase of the shares held by the largest shareholder and the tender offering were planned simultaneously and were announced on the same day. Purchase of the old shares and the tender offering must be considered as the same deal, and it had to go through preliminary examination of the Fair Trade Commission. However, as it did not undergo a preliminary examination, it is problematic.”

CFO Jang expressed concerns, “Even if the shares are purchased, the Fair Trade Commission examination will serve as a risk for SM’s future. If a conditional approval for corporate consolidation is granted, there is a possibility that HYBE will reduce the size of the SM, the acquired company’s business, to execute corrective measures prescribed by the Fair Trade Commission. Even if approval is granted, the delay in the examination process will create a setback for SM in executing its business strategy.”

Regarding this, HYBE said, “We will be focusing on improving SM Entertainment’s corporate governance to revise the company’s internal management structure, as well as continuing to maximize shareholder value. The proposed tender price will remain unchanged.”

Source: naver

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