Kakao Bids USD 962M To Acquire SM Entertainment

On Tuesday, South Korean tech group Kakao made a 1.25 trillion won ($962 million) bid for K-pop agency SM Entertainment, escalating a takeover battle with BTS manager HYBE, whose proposal was rejected by SM investors.

On Tuesday, SM shares rose 14% to 148,500 won, just short of Kakao's tender price of 150,000 won to acquire up to 35% of the entertainment group behind popular K-pop groups such as NCT and Aespa.

The offer by Kakao Corp and its subsidiary Kakao Entertainment comes after a court granted SM's founder and largest shareholder Lee Soo-request man's to block Kakao's earlier deal with SM, which would have made Kakao the entertainment group's second-largest shareholder.

Lee also sold a 15% stake in the company to rival HYBE, setting up a takeover battle for the company that has pioneered the K-pop industry since its founding by the Korean folk song singer and creator decades ago.

HYBE, which has outgrown SM in recent years due to the global success of boy band BTS, planned to purchase an additional 25% of SM through a tender offer. However, in light of an expected rival offer from Kakao, investors did not support its 120,000 won per share offer.

The Kakao group, which already owns nearly 5% of SM, stated that its plan to control up to 49% of SM would strengthen its strategic partnership with the company.

"Kakao decided it is inevitable to secure the largest shareholder position to protect the partnership with SM Entertainment," Kakao said in a statement.

Kakao Entertainment received 1.2 trillion won from leading sovereign wealth funds in January, making it the largest overseas financing in a South Korean content company.

HYBE had no immediate comment on Kakao's tender offer or whether it intends to submit a new proposal to SM.