Will CJ be the new owner of SM Entertainment?
CJ E&M is reportedly in an exclusive negotiation with the general producer of SM, Lee Soo-man, to acquire shares that is worth about 600 billion won.
The biggest issue of the entertainment industry this year is the choice of SM Entertainment in the merger and acquisition market. Kakao was mentioned as a strong candidate for the acquisition, and recently CJ E&M is known to be in exclusive negotiations, drawing keen attention to how the result will turn out.
According to the entertainment industry on Oct 17th, CJ E&M is currently negotiating with Lee Soo-man, SM’s largest shareholder (18.72% stake), to acquire his stake. Some media outlets have even reported that “CJ E&M will split the music sector into subsidiaries and merge with SM” and “Director – Producer Lee wants to manage the integrated company“. However, even though both CJ E&M and SM don’t deny anything, they still “don’t know what will happen.” Analysts say the acquisition price will be around 600 billion won, considering SM market capitalization (1.82 trillion won as of the closing price on Oct 15th) and management premium.
In the first half of this year, as fandom platforms and K-pop contents where idols and fans can communicate with each other grew, the merger of entertainment, information technology (IT), and broadcasting industries was actively carried out. In March, HYBE‘s fandom platform Weverse, which has BTS, Naver’s K-pop live video service “V-LIVE”, and YG Entertainment, which manages BLACKPINK, decided to integrate, forming a huge alliance of “Naver-HYBE-YG”. Weverse has emerged as a powerful platform that can secure more than 200 million subscribers by possessing all artists ranked first to fourth in YouTube subscribers number (Justin Bieber, Ariana Grande, BTS, and BLACKPINK). As a result, the competitors’ awareness of a crisis has increased. Industry sources say that producer Lee has chosen a good time to increase market volatility.
HYBE and Naver also considered acquiring SM, but it is reported that producer Lee Soo-man is not the preferred target for their negotiations. The acquisition of HYBE in the same industry is something that the pride of “original idol agency” SM Entertainment does not allow, and some say that Naver has joined hands with HYBE, creating an emotional goal for SM.
When SM was first put up for sale, Kakao reportedly actively considered the acquisition. Kakao is competing with Naver for content such as webtoons and web novels abroad, see this acquisition as an opportunity to supplement their K-pop sector, which is considered relatively inferior comparing to its rival. SM is managing idol groups with thick fandoms such as EXO, NCT 127, Red Velvet, and aespa. SM also operates a fandom platform “Bubble” jointly with JYP Entertainment, enabling the formation of a confrontation between “Naver-HYBE-YG” and “Kakao-SM-JYP.” However, the terms of the acquisition of both sides were not met, and Kakao seems to have stepped down from the acquisition race due to the growing criticism and regulatory atmosphere over Kakao’s recent octopus-style expansion.
There are also rumors in the industry that CJ Group Vice Chairman Lee Mi-kyung and Producer Lee had met. Some analysts say that if CJ E&M takes over, a synergy could occur. CJ E&M has 16 channels, including tvN and Mnet, and even large management companies in online video services such as TVing. SM can also give more opportunities to its celebrities through CJ E&M and play a leading role in the music sector after the merger. It is also possible for them to strengthen cooperation with the fandom platform “Universe” which is jointly made by NCsoft and CJ E&M against Weverse.