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K-pop: HYBE concedes to Kakao in fight for SM Entertainment

March 12, 2023

BTS' management agency HYBE has lost a weeks-long tussle for South Korea's second-largest entertainment group to the tech conglomerate which owns KakaoTalk.

https://p.dw.com/p/4OYtM
Lee Soo-man, founder and former chief producer of SM Entertainment, speaks during a dinner meeting
Lee Soo-man is also called 'the godfather of K-pop'Image: picture alliance/YONHAPNEWS AGENCY

HYBE Co Ltd., the management agency of K-pop supergroup BTS, on Sunday said it will stop its efforts to acquire rival SM Entertainment as competition has led to an overheated market.

The announcement concludes a weeks-long tussle with internet giant Kakao for the management rights over the company.

"In light of recent developments, HYBE discussed the matters with Kakao and reached an agreement to suspend the process of acquiring SM's management rights," the agency said in a statement.

Meanwhile, Kakao said it will "continue its tender offer bid until the 26th to secure a further stake and work on the details of business cooperation between HYBE and SM."

SM Entertainment — the second largest entertainment group in South Korea behind HYBE — will now come under the control of the tech conglomerate which owns messaging app KakaoTalk. 

The battle for dominance of the K-Pop scene

The takeover battle began with a family feud.

SM founder Lee Soo-man, widely known as "the godfather of K-pop," paved the way for K-pop's success in the early days of the industry. He is credited with producing key icons in an early generation of artists such as BoA, Girls' Generation and TVXQ. 

Hints of a power struggle emerged when Lee's 43-year-old nephew Lee Sung-soo called the founder the "Emperor of SM Empire" in a YouTube video and criticized him for demanding unfavorable revenue-sharing deals and undermining SM's governance.

Lee's nephew went on to reveal that future plans for the company did not include the veteran.

Lee Sung-soo, in turn, said he was hurt by his nephew's words. Soon after, he sold his 15% shares of the company to HYBE, making it the largest shareholder of SM.

Share prices of the company more than doubled in a month.

SM's management, arguing that HYBE's hostile takeover would create a K-pop monopoly and damage the industry's potential, brought in Kakao in an effort to take back control. 

The cash-rich tech conglomerate has since been seeking to buy a controlling share of SM Entertainment to block HYBE.

mk/ar (Reuters, AFP)