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| yna@yna.co.kr 2023-02-13 16:10:16
SEOUL February 13 (Yonhap) -- HYBE which has started its process of acquiring SM Entertainment’s management rights, started its process with takeover of minor shareholders.
According to the finance industry on Monday, HYBE will be buying in minor shareholder’s stock which consists of 25 percent of common shares of SM Entertainment for 120 thousand won per stock until March 1.
The total amount HYBE plans on investing in the takeover is estimated to exceed 700 billion won.
Over 50 thousand people are currently classified as the small shareholders of SM entertainment and 70.53 percent of SM Entertainment’s stock is currently being held by possessed by the minor shareholders.
Currently a single share of SM Entertainment is being sold at 117 thousand one which is little bit lower than what HYBE has offered to the shareholders, however it has showcased 2 percent increase in price according since February 12.
If the stock price were to stay below 120 thousand won, minor shareholders are expected to positively look over the option of selling their stock to HYBE.
Researcher Ahn Jin-ah from eBest Investment and Securities, addressed “We have decided to acknowledge the premium of the major shareholder HYBE of the SM Entertainment and decided to proceed with the takeover under rightful supervision.”
The market initially estimated that 3 trillion to 4 trillion won is needed in order to collect enough stocks to receive management rights of SM Entertainment.
The number adds up to 120 thousand won to 168 thousand won per stock. If one plugs these information into the equation, the total amount of money needed to buy out 20 percent of SM Entertainment one would need over 6 billion won to at most 8 billion won.
Researcher Ahn addressed “The amount HYBE has offered publically fits within the rightful amount of stocks and in total, it is expected to cost HYBE about 700 billion won.”
HYBE also agreed on buying in 14.8 percent of the biggest shareholder of SM Entertainment Lee Soo-man’s shares for 120 thousand won per share, which accumulates as 436 billion won in total.
If HYBE were to successfully finish the process of buying the stocks from minor shareholders of SM Entertainment then the company will withhold in total of 39.8 percent of the total stocks of SM Entertainment. For roughly 40 percent of the SM Entertainment’s total stock, HYBE will have spent over 1.1 trillion won. Moreover, HYBE has signed a put option regarding the remaining 3.65 percent of former executive producer Lee Soo-man.
Given the option of HYBE successfully buying out 3.65 percent of Lee Soo-man’s personal stocks, HYBE will end up holding 43.5 percent of SM Entertainment’s overall stocks, leaving the company in firm grip on management decisions.
Researcher Lee Nam-soo of Kiwoom Securities addressed “Since it takes 1.1 trillion won for HYBE to buy the amount of stocks within the process of contract, the outcome of buying those stocks should be very solid.”
Moreover, researcher Ahn stated “If HYBE were to become the biggest shareholder of SM Entertainment will become the biggest K-pop label which will lead the scene of K-pop all throughout various K-pop generations.”
As the process of takeover between HYBE and SM Entertainment has kicked off Kakao has not showcased any moves regarding the subject.
Within the finance industry Kakao has low possibility of showcasing any reaction regarding such movements between HYBE and SM Entertainment.
Researcher Lee Ki-hoon of Hana Security addressed “The chance, Kakao Entertainment will additionally purchase SM Entertainment’s stock,” adding “Joining the paid in capital increase and printing out convertible debentures might be some of the legal measures Kakao might be able to take, however it will lead the company in very heavy burden and risks in the near future.”
Adding on to his opinion, researcher Lee addressed “If Kakao Entertainment were to proceed with the process of joining paide capital increase and to print out convertible debentures, under the current state of owning 9 percent of the shares, the action will provide Lee Soo-man with a reason to file for an injunction” adding “However, if Kakao were to jump in and start the takeover process, the company will address their future plans after successfully buying in 5 percent of the additional stock with higher stock price than the one offered by HYBE.”
Lee Hwan-wook, the researcher of IBK Securities and Investment, stated “Currently Kakao is facing the situation of having to buy out the stock of SM Entertainment in higher price than 120 thousand won per stock, therefore the risk of overspending money from their previous plan.”
Kakao Entertainment’s paid in capital increase and HYBE’s plan to buy in the stocks will both happen in June of 2023, Kakao Entertainment’s plan needs to be firm beforehand.
SM Entertainment’s minor shareholders, will react to the most profitable option after carefully calculating the odds.
Allign partners addressed “Given the possibility of the successful implementation of SM 3.0 Multi-producing, 120 thousand won is a cheap price.”
Moreover, researcher Lee addressed “HYBE has offered minor share holders of SM Entertainment with the same premium offered to the major shareholder of SM Entertainment,” adding “Although shareholders do not have any reason to deny the offer given by the HYBE, it is ultimately their choice and one should take the most beneficial offer.”
(This article is translated from Korean to English by Joonha Yoo)
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