Kakao outbids HYBE in new public offer to earn a 35% stake in SM Entertainment
The battle for SM Entertainment’s largest shareholder doesn’t seem to be over yet.
Currently, HYBE is the majority shareholder of the company bought by Lee Soo Man. With that, HYBE overtakes cocoa, which doesn’t want to stop.
On March 7, Kakao made a 1.25 trillion won bid for agency SM Entertainment, sparking a takeover battle with Hybe, whose proposal failed to win SM’s support.
As such, Kakao would plan to become the controlling shareholder of SM Entertainment by buying up to 35% of SM Entertainment’s shares at a price of KRW 150,000 per share. The price is 25% higher than the price of KRW 120,000 that HYBE paid last month.
If Kakao succeeds, it will become SM Entertainment’s largest shareholder, overtaking HYBE.
Previously, HYBE announced that it has so far acquired 233,817 shares in the public market, or 0.98% of the company, a far cry from the 25% it had planned. In total, HYBE owns 15.78% of the shares of SM Entertainment.
So what should HYBE’s strategy look like? Many insiders believe that countering Kakao’s offer will be difficult for the company, but not impossible if HYBE mobilizes enough resources for the acquisition.
It should be noted that HYBE recently selected Morgan Stanley as the organizer and is in contact with domestic and foreign financial investors (FIs) to attract an investment of about 1 trillion won.
It is known that a significant number of financial institutions are interested and discussing it, and insiders predict that HYBE will have no trouble increasing the target investment.
In addition, HYBE plans to borrow about 300 billion won in acquisition funds through a large domestic investment firm.
Although the amount of money to invest before the buyback has increased by 50% since the announcement of the offer price of 120,000 won per share, there seems to be no problem betting with trillions of dollars in investments and loans.
If HYBE wishes to acquire an additional 25% stake at a price of 180,000 won per share, a total of 1.713 billion won will be required.
Pre-acquisition costs have increased by about 357 billion won in just over a month from when the tender offer was announced on Feb. 10 at 120,000 won per share.
Meanwhile, senior executives at SM Entertainment expressed their support for Kakao’s new takeover bid, which ends on March 26.
The agency said in a statement: “Unlike HYBE, which is attempting to take control of SM’s board through a hostile M&A, Kakao is the best horizontal and strategic partner for the successful implementation of the ‘SM 3.0’ vision while respecting SM’s tradition and identity. »
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