BTS agency HYBE, Kakao and SM shares rally amid K-pop restructuring

SM Entertainment Co

14/02/2023 04:41

SEOUL, Feb 14 (Reuters) - BTS agency HYBE  352820.KS ,
Kakao Corp  035720.KS  and SM Entertainment  041510.KQ  shares
all rallied in early trade on Tuesday as South Korea's K-pop
industry heads for a major restructuring.
    HYBE shares saw a 4.5% jump against the wider market's 0.85%
rise while Kakao shares rose 1.56% as of 0409 GMT.
    SM shares also rose by 0.95% after hitting a high of 119,000
won, nearing the tender offer price of 120,000 won as part of
HYBE's deal to take over SM's management rights.
    The three made headlines after HYBE announced plans on
Friday to acquire up to a 39.8% stake in SM. That includes a
14.8% stake from founder Lee Soo-man that has been already
agreed, as well as 25% through a tender offer, just days after
Kakao agreed to buy a 9.05% stake in SM.
    HYBE and SM are two of the largest K-pop agencies, and
analysts said the SM takeover would further solidify HYBE's
position as the industry leader.
    "Through this deal to acquire a 40% stake in SM, HYBE will
have a lineup of K-pop artists from multiple generations, as
well as expanding its range of foreign artists through the
acquisition of Ithaca Holdings and a U.S. hip-hop label," Jina
Ahn, an analyst at eBest Investment & Securities, said in a
note.
    "It will dispel the concerns over the slowdown of profit
growth caused by BTS' hiatus," Ahn added.
    The band plans to reunite in 2025 after pursuing individual
projects.
    SM and HYPE should be able to achieve cost savings and a
larger scale from combining their platform, solution and music
label businesses, according to Lee Ki-hoon, an analyst at Hana
Financial Investment Co.
    "Acquiring around 40% of shares in SM could give HYBE at
least an additional 1.5 trillion won ($1.18 billion) in
enterprise value," Lee said in a note.
($1 = 1,268.3200 won)
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 (Reporting by Hyunsu Yim; Editing by Jamie Freed)
 ((Hyunsu.Yim@thomsonreuters.com;))