By Hyunsu Yim
SEOUL (Reuters) – BTS agency HYBE saw shares rally 6.6% on Tuesday as the market bet it would emerge as the winner from a major restructuring of South Korea’s K-pop industry, boosting its earnings and giving it even greater market dominance.
HYBE announced plans on Friday to acquire up to a 39.8% stake in SM Entertainment. 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 rival Kakao agreed to buy a 9.05% stake in SM.
HYBE’s share price gain far outpaced the wider market’s 0.57% rise. 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.
As shares rallied, SM became the ninth-largest company listed on the smaller Kosdaq index on Tuesday, putting its market capitalisation at 2.79 trillion won ($2.20 billion) and outpacing rival K-pop agency JYP Entertainment.
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.
SM, founded in 1995, was at the forefront of taking K-pop global with acts like Girls’ Generation and EXO.
Jina Ahn, an analyst at eBest Investment & Securities, said the deal would give HYBE a line-up of K-pop artists from multiple generations as well as expanding its range of foreign artists.
“It will dispel the concerns over the slowdown of profit growth caused by BTS’ hiatus,” Ahn said in a note.
Top-selling boy band BTS 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.
In a town hall meeting with staff on Monday, HYBE CEO Park Ji-won said he respected SM’s legacy and promised to ensure the label’s independence, Yonhap reported on Tuesday. HYBE declined to comment.
($1 = 1,268.5700 won)
(Reporting by Hyunsu Yim; Editing by Jamie Freed)
