While doing well on the M&A (Mergers & Acquisitions) stock market, the fact that SM Entertainment put their stocks for sale has become a hot topic.
Big agencies such as Kakao, CJ, Naver, and HYBE are sending their calls for the stocks. Let’s look at the progress of the sales of SM’s stocks.
SM Entertainment was founded by producer Lee Soo Man in 1995. This is the 1st generation entertainment company in Korea and one of the leading agencies in the entertainment industry. In 1996, their first group, H.O.T debuted. After that, SM continued to produce various other famous idol groups, including S.E.S., Shinhwa, TVXQ, Girls’ Generation, and E.X.O. With the success of their idol groups, SM proudly established itself as a leading entertainment agency. In particular, CEO Lee Soo Man has maintained his management control of SM for 26 years since the establishment of the company.
However, recently, Lee Soo Man decided to sell up to 18.73% of SM’s stocks. Except for CEO Lee Soo Man, the only shareholder of more than 5% (5.04% exactly) is the Korea Investment Management. In fact, Lee Soo Man is taking over the whole SM Group, including SM and its 38 subsidiaries.
The candidates for the acquisition of SM’s stocks are Kakao Entertainment, C.J Group, Naver, and HYBE. It was reported that SM and Lee Soo Man are discussing with these companies, but nothing has been confirmed yet. In particular, experts in the stock market are expecting Kakao Entertainment to be the strongest candidate.
CEO Kim Bum Soo of Kakao and Vice CEO Lee Mi Kyeong of CJ are proceeding discussion with Lee Soo Man
Kakao Entertainment is a company that conducts various kinds of businesses such as producing and distributing music content, artist management, and providing video content. ‘Melon’, one of the biggest music platforms, also belongs to Kakao. If Kakao acquired SM, these 2 large company can maintain their partnership and proceed rapidly into the video content business. Therefore, SM can create more content such as dramas, movies, and other original content on KakaoTV for their artists.
Kim Bum Soo, CEO of Kakao, is said to be currently in contact with SM executives, including Lee Soo Man, to discuss the acquisition of SM’s stocks. If Kakao takes over SM and forms a solid partnership, the collaboration of SM & Kakao can become a strong counterpart to be compared to Naver & HYBE.
One of Kakao’s biggest competitors is CJ Group. CJ’s vice CEO. Lee Mi Kyeong was in the US. However, she is also interested in buying SM’s stocks, so she returned to Korea to proceed with the acquisition meeting with Lee Soo Man. CJ E&M, a subsidiary of CJ Group, is a leading company in Korea’s culture industry and holds a great impact in the music industry. In addition, if CJ acquires SM, they can set new moves in various other fields, including movies, physical album sellings, and broadcasting channels.
In addition, Naver and HYBE are also trying to buy SM’s stocks but were already refused by Lee Soo Man. The competition of acquiring SM now depends on Kakao and CJ. The investors estimated that the amount of money to acquire SM could be up to 2.5 to 4.5 trillion won. Moreover, they also predicted that SM’s value will still rise despite whoever acquires their stocks.
SM planned to sell stocks due to the importance of management capabilities
Experts in the market and the public have raised questions on why Lee Soo Man decided to sell stocks while his company is doing well. It is true that a producer with great management ability determines the success of a company. In particular, although CEO Lee Soo Man has such a good sense in this field, he also doubts the management ability of his 2nd generation.
It can’t be denied that Lee Hyun Kyu, the eldest son of Lee Soo Man, has achieved great success. He composed songs for EXO. and Girl’s Generation in 2013 and was a music director in SM. However, due to the failure of Lee Soo Man’s other company, “Like Planning”, SM’s shareholder value decreased. This forced Lee Hyun Kyu to resign from his position as a music director, and since then, he was not given any opportunities in management.
In addition, it seems like Lee Soo Man has planned to sell the stocks for years before. In 2013, he was arrested for embezzlement and was punished for tax invasion twice. Moreover, he was also involved in a conflict with the Fair Trade Commission. After his wife died in 2014, Lee Soo Man seemed to have been exhausted. Rumors about him selling SM’s stocks have been spread for years. However, this is the first time that they have mentioned the candidates for the acquisition.
In the entertainment industry, the capability of management is really important. Therefore, experts said that it is not necessary for Lee Soo Man to pass on the managing power to his 2nd generation. Moreover, it seems to be the right time to put SM’s stocks on sale because the value of the company is still rising due to SM’s positive performance recently.