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| yna@yna.co.kr 2024-04-29 13:43:52
SEOUL, April 29 (Yonhap) -- Disputes have intensified between Hybe and the CEO of its sublabel ADOR, the management of girl group NewJeans, over their shareholder agreement.
According to music industry sources on the 29th, ADOR’s CEO Min Hee-jin and her associates at ADOR have demanded an increase in the multiplier for putback options (the right to sell shares at a specified price regardless of market value) from the existing 13 times to 30 times among the ADOR shares they held at the end of last year.
Under the existing agreement, if Min exercises the putback options, Hybe would apply a stake ratio based on 13 times the average annual operating profit of ADOR over two years, which would currently amount to approximately 100 billion won.
The numbers match Min’s statements she made during the press conference on the 25th. She said, "If I wanted money, I wouldn't have brought up this internal disclosure. I would make 100 billion won by just staying still."
At the time of Ador’s establishment in 2021, Hybe had initially offered Min stock options equivalent to 10% of the total issued shares and putback options with a multiplier of 13 times. Additionally, they promised a cash bonus equivalent to 5% of the total issued shares, totaling a stake of 15%. Accordingly, Min could have received a total of 73.7 billion won.
But when the rookie girl group NewJeans turned out a jackpot, Min’s side demanded compensation based on their performance. In response, Hybe increased the stake ratio to 20% (including shares held by associates), adding an extra 5% to the existing 15%. Until then, the putback options with a multiplier of 13 times were only applicable to the 15% stake.
The issue arose during renegotiations of shareholder agreements among shareholders at the end of last year, less than a year after the initial agreement was signed.
At this point, Min's side requested an increase in the multiplier for putback options to 30 times and demanded the application of putback options for the additional 5%. They argued that they were bound by a 'non-compete clause' due to being entangled in slave contracts, preventing them from freely selling the 5% stake.
While Hybe agreed to apply putback options for the remaining 5%, they rejected the proposal to apply a multiplier of 30 times, deeming it excessive.
If the requested multiplier of 30 times is applied, the value of the putback options exercise would skyrocket from the existing 100 billion won to '2.4 trillion won + α'. Moreover, if the operating profit of ADOR, which serves as the basis for exercise, increases due to NewJeans' rapid growth, Min could potentially receive even more.
Hybe deemed the increased compensation astronomical and excessive, leading to a deadlock in negotiations as they refused to accept it.
Amidst this, Min's side raised suspicions of copycat similarities between NewJeans and ILLIT earlier this month. While investigating the background, Hybe reportedly activated its audit authority upon discovering what is referred to as an 'attempted takeover,' based on tips and other information.
Hybe suspects that Min's side has been requesting revisions to shareholder agreements in their favor since last year to increase the value of their stake and expand the authority of the CEO to facilitate the acquisition of management rights.
Furthermore, Hybe has stated that it's willing to accept the application of putback options for the disputed 5%, the key factor of the alleged “slave contract,” as long as Min agrees. According to Hybe, there would be no issue if Min accepts it.
Min's side and their legal partners, on the other hand, have stated that negotiations are still ongoing and nothing has been finalized.
Moreover, Hybe has pointed out that they have tied the exercise of putback options for the additional 5% to 8 years of tenure, which differs from the existing 15% stake, which can be exercised after 5 years of tenure and in 2026.
From Min's perspective, the opportunity to fully cash out ADOR shares would come at the 8-year mark in 2029, which is considered excessively late.
However, Hybe maintains that the addition of putback options for the disputed 5% is a natural condition that could potentially bring in much more profit than market value.
According to market observers, if Hybe brings up violations of shareholder agreements, Min's exercise of putback options could decrease from the current 100 billion won based on present circumstances.
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