On the 11th, according to investment banking (IB) industry sources, Kakao has agreed to acquire the entire stake of lead shareholder Lee Soo-man, the representative producer, from SM Entertainment and is awaiting official announcement.

Previously, the market had been focusing on CJ ENM as a strong "seller," but Kakao Entertainment has been actively considering the acquisition of SM Entertainment, tilting the acquisition battle in Kakao's favor.

The acquisition target is 18.72% of SM Entertainment's shares held by lead shareholder and executive producer Lee Soo-man. According to industry insiders, Kakao is paying a price more than 2-3 times the current stock price for SM Entertainment. Considering SM Entertainment's closing price on the 10th, Kakao's acquisition amount is estimated to be close to 1 trillion won.

The industry expects that if Kakao acquires SM Entertainment, the synergy effect will be maximized. In particular, it is analyzed that they will secure a 20% market share within the domestic entertainment production market, leaping to the second-largest operator after HYBE (33%).

Meanwhile, with this acquisition, Kakao Entertainment is expected to become the lead shareholder of SM Entertainment, and the governance issues with Like Planning are also expected to be resolved. SM Entertainment has decided to proceed with organizing its contract with Like Planning.

Like Planning is a private company wholly owned by executive producer Lee Soo-man. It has been criticized for "concentrated orders," securing up to 46% of SM Entertainment's annual operating profit under the guise of production services.

Article Source: ⓒ Korea Economic TV

These are English translations of articles from our GTTOUR Japanese website.