South Korean Entertainment Company HYBE to buy Shares Worth USD 335M in SM Entertainment

HYBE, a South Korean entertainment company, announced on Friday (Feb 10) that it will purchase 423 billion won (US$335 million) in shares in rival SM Entertainment in order to gain management rights and strengthen its position in the K-pop industry.

HYBE will become SM Entertainment's largest shareholder after purchasing a 14.8% stake in the company from the previous largest shareholder and SM founder, Lee Soo-man, the company said in a statement.

"HYBE fully agrees with former Chief Producer Lee’s strategic initiatives including metaverse, a multi-label system, and the sustainable vision campaign," said HYBE Chairman Bang Si-Hyuk.

HYBE is the agency in charge of managing the K-pop mega-band BTS. Other popular K-pop acts at SM include NCT and Aespa.

On Friday, HYBE also made an offer for SM shares held by minority shareholders, seeking to acquire up to 25% of the rival agency with the intention of acquiring management rights.

For many years, the South Korean pop music industry was dominated by three major companies: SM, JYP, and YG Entertainment. However, when K-pop boy band BTS rose to international fame, HYBE surpassed the other three.

However, all seven BTS members are expected to begin military service in the coming years, beginning with Jin, the group's oldest member, who joined the military in December. The septet will be back in full only in 2025.

With the group on hiatus, HYBE will benefit commercially from SM Entertainment's extensive portfolio, according to music critic Kim Do Heon.

"HYBE became a behemoth but its weakness was not having legacy. SM is a company that existed throughout K-pop's history and will bring heritage to HYBE," Kim said.

As of 11:05 a.m., HYBE and SM Entertainment were up 6% and 16%, respectively (0205 GMT).

Kakao Corp, a South Korean tech firm, announced earlier this week that it would acquire a 9.05 percent stake in SM Entertainment in order to pursue joint projects such as global K-pop auditions.