HYBE has now spent $600m+ in one week, as it buys 14.8% stake in K-Pop rival SM Entertainment for $334m

There is a lot of consolidation going on amongst the giants of the K-Pop industry.

Earlier this week, we learned that South Korea-based Kakao Corp had acquired a 9.05% stake in K-Pop company SM Entertainment, which is behind stars like NCT, EXO and Aespa.

According to Reuters, Kakao is buying its stake in SM Entertainment in a deal worth 217.2 billion won ($172.8 million).

Now, another giant of the K-Pop world, HYBE, the company behind superstars BTS, is also taking a stake in SM Entertainment.

HYBE is buying a 14.8% stake in the company from SM Entertainment founder Lee Soo Man, in a deal worth 422.8 billion South Korean won (approx. $334.5 million).

Lee Soo Man was the company’s biggest shareholder prior to the deal, with an 18.46% stake.

Today’s news arrives in the same week that HYBE America, led by Scooter Braun, agreed to acquire Atlanta rap powerhouse QC Media Holdings or Quality Control, home to acts such as Lil Baby, Migos, Lil Yachty and City Girls.

The company did not disclose the size of the acquisition, but Variety reported that the deal is valued at $320 million in stock and cash, meaning that globally, HYBE has spent over $600 million in just one week.

Kakao’s acquisition of 9.05% of SM Entertainment earlier this week made it SM’s second-largest shareholder, meaning that HYBE, with a 14.8% stake in the company, is now SM Entertainment’s largest shareholder. HYBE also reportedly plans to acquire more shares from minority investors to up its stake in SM Entertainment.

The change in the share ownership of the company comes amidst reported tension between SM Entertainment’s management and founder Lee Soo Man, who planned to file a lawsuit against the company earlier this week following the Kakao deal.

Reuters reports that HYBE’s investment in the company via the acquisition of shares from Lee Soo Man has been criticized by SM Entertainment’s leadership.

SM said in a statement that it “oppose[s] all aggressive outside mergers and acquisitions including HYBE”.

HYBE Chairman Bang Si-Hyuk said in a statement that his company “fully agree[s] with [SM Entertainment founder] Lee’s strategic initiatives including metaverse, a multi-label system, and the sustainable vision campaign”.

Lee Soo Man, founder and Chief Producer of K-Pop giant SM Entertainment, delivered a speech at Stanford University in May last year outlining his vision for K-Pop.

His vision includes the SM Culture Universe (SMCU), a character-led universe akin to cinematic multiverses like those created by comic giants Marvel or D.C., is at the centre of SM’s content strategy.

This week, SM Entertainment announced a new growth strategy, dubbed SM 3.0, which will involve setting up five new production hubs and several music labels at home and overseas. The plan is aimed at systematizing the production process for artists.

The move was unveiled by co-chief executive officers, Lee Sung Soo and Tak Young Jun, in a video uploaded on YouTube on Friday (February 3) .

The SM 3.0 strategy is seen as an attempt to reduce the company’s creative dependence on Lee Soo-man.

In October 2022, SM also cut ties with a private company owned by Lee called Like Planning over concerns about the agency paying billions of South Korean won annually to the firm.

SM posted a 65.4% year-over-year revenue rise in Q3 2023,  to 238.1 billion South Korea won (USD $189.9m), driven by a 76.1% increase in the revenue of its ‘MD/Licensing’ business unit.Music Business Worldwide

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