Korean music megacorporation Hybe, owner of boyband phenomenon BTS, has caught the eye of South Korean regulators following its 13% stake acquisition of rival SM Entertainment, and a reported offer for a further 25%.
The combined 40% stake acquisition for a US$900mln price tag would represent a major consolidation of the K-pop entertainment complex, with Hybe in pole position.
Another player in the South Korean entertainment scene, Kakao, has also announced a 9% acquisition of SM Entertainment.
Im Kyeong-hwan of the Korea Fair Trade Commission (KFTC) flagged market dominance concerns in the K-pop sector should such a deal go through, noting the potential impact on the prices and quality of management, record sales, streaming, tours and merchandise.
But combinations involving IP of this pedigree are unchartered waters for the KFTC.
"There have been acquisition deals involving small and medium-sized entertainment agencies, a deal on this scale is a first for us," said Im Kyeong-hwan.
Activist investors step in
Hybe is also facing competition from activist investor Align Partners, which owns a 1% stake in SM Entertainment.
Align’s chief executive Lee Chang-hwan believes Hybe's offer to SM Entertainment at US$94.88 per share is too low and needs to be “meaningfully upgraded”, as stated in a recent Bloomberg interview.
Lee Chang-hwan is pushing Hybe to buy 100% of SM Entertainment to eliminate conflicts of interest between the major shareholders.
In another interview, Lee Chang-hwan noted that Hybe and SM Entertainment accounted for 52% of record sales in the previous year, thus agreeing with the KFTC’s concerns on concert tickets and album prices, adding that the impact of the acquisition on the diversity of the K-pop industry is a "question worth asking".
Proactive has reached out to Hybe for a comment, but a reply has Yet To Come.