HYBE Labels CEO Park Ji-won has issued a new open letter addressing the K-pop company’s recent acquisition of the majority stake in competing label SM Entertainment.
The statement was published in Korean, English and Japanese earlier today (February 22) via HYBE’s official Twitter. It announced the completion of HYBE’s acquisition of a 14.8 per cent stake in SM, a deal which the company struck with SM founder and former chief producer Lee Soo-man earlier this month.
This officially makes HYBE, home to the likes of BTS, SEVENTEEN, NewJeans and more K-pop acts, the single largest shareholder in SM. The company, which grew 41.6 per cent in 2022 and raked in an approximate revenue of KRW1.78trillion (£1.12billion), has also offered to purchase another 25 per cent stake in the agency from minority investors.
According to Yonhap, HYBE said in a regulatory filing that it had paid for the purchase – KRW422.8 billion worth of shares from Lee Soo-man, who had 18.46 per cent stake in HYBE when the deal was struck – earlier than scheduled.
“As promised on February 10, HYBE resolved the governance issue between former Chief Producer Lee and SM during the course of the share acquisition. SM will be moving to become a company with a transparent governance structure that prioritises shareholder value,” Park wrote in the open letter, before going on to articulate “the similarity between HYBE and SM’s corporate philosophy and the synergy we can collaborate to create in the coming future”.
Park’s statement outlines plans for HYBE and SM to integrate their “creative capabilities and content-oriented culture” to “showcase a historic innovation in the global scene”. Echoing statements Park made to HYBE employees last week, Park’s statement says SM will be able to operate with”complete autonomy” as HYBE respects SM’s “legacy and creative values”.
Park also promised to “support SM artists’ endeavours in making a presence in the global music industry”. Both companies’ existing fan community platforms – HYBE’s Weverse and SM’s Bubble – “will expand beyond Korea and compete in the global arena”, wrote Park.
“The global music industry is undoubtedly paying close attention to K-pop and its international success. Yet it still has so much possibility to reach a greater fanbase with more content and experiences to offer,” the statement read. “K-pop flourished in an environment where we could challenge ourselves to. We should conserve the ground so that we can stand shoulder-to-shoulder with the world’s major record labels.”
OPEN LETTER TO FANS, ARTISTS, EMPLOYEES, AND SHAREHOLDERS OF SM ENTERTAINMENT pic.twitter.com/CsxqAmopFy
— HYBE OFFICIAL (@HYBEOFFICIALtwt) February 22, 2023
Park Ji-won also addressed concerns from SM Entertainment’s employees, executives and fans, expressing HYBE’s support of the company strategy SM’s leadership recently unveiled, called ‘SM 3.0’. “I am aware of the concerns that fans, artists, employees and shareholders of SM have, due to rumours and speculations around the company. HYBE fully respects the direction laid out in SM 3.0 growth strategy, as well as the value and vision SM’s employees and artists have created.”
Park also said he wanted to “express my regret to SM artists in particular”. The label’s roster includes Girls’ Generation, NCT, aespa, SHINee and more. “We respect SM’s artists as much as we do our artists at HYBE. Leveraging the expertise we have accumulated, we will do our best to create a brighter future for all artists under SM,” continued Park, who later described the acquisition as “an era of change for both companies”.
Park’s open letter to SM Entertainment and its fans comes a day after HYBE denied its acquisition of SM was a “hostile takeover” in a conference call on February 21, as SM CFO Jang Cheol-hyuk said in a video statement opposing the move a day prior. “We don’t think the company’s acquisition of SM shares is a hostile merger and acquisition,” Park said, per Yonhap.
“That’s because we agreed to buy shares held by SM’s largest shareholder (Lee) through mutual consent and publicly offered to buy shares from smaller shareholders on the same condition as the largest shareholder,” the HYBE CEO continued.
Though SM has yet to respond to the HYBE open letter, it has today shared a video on its official YouTube channel about the merits of a partnership with Kakao, the South Korean tech company that announced its acquisition of a 9.05 per cent stake in SM Entertainment days before HYBE’s own announcement of its acquisition. Lee Soo-man’s legal counsel, however, alleged that Kakao’s acquisition of company shares was an “act of illegality” and filed an injunction to stop the transaction.
HYBE is open to working with Kakao, HYBE CEO Park said yesterday, per Korea Joongang Daily. “Based on the assumption that Kakao does not have interest in business management, we are open to business proposals that benefit SM Entertainment, but as Kakao has yet to inform the specifics into its partnership or proposal, understand that it’s too early for me to mention about it.”
SM’s leadership and employees have fiercely opposed HYBE’s acquisition of the agency, with CFO Jang Cheol-hyuk and CEO Chris Lee (or Lee Sung-soo) releasing multiple video statements explaining their stance and why the company severed ties with Lee Soo-man, who sold his shares to HYBE.
In the latest statement released Monday, Jang claimed that SM’s artists would not be prioritised amid HYBE’s already “saturated” roster of artists and that HYBE acquiring SM would effectively create a monopoly detrimental to the K-pop industry as a whole, among other claims.
Jang’s video concluded by reproducing a February 17 statement released by 208 SM employees stating their opposition to the HYBE takeover and pledging to “protect” SM.
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