SM Entertainment shares official statement, details "negative consequences" of HYBE's alleged "hostile takeover"

SM Entertainment just released a statement about HYBE's alleged "hostile takeover." 

On 20 February, SM Entertainment released a 15-minute video explaining why they're against HYBE's acquisition of SM Entertainment. This comes as the company's first official statement on their official channels, following co-CEO Chris Lee's video posted on his personal channel last week where he shared allegations towards SM Entertainment's founder and former Chief Producer Lee Soo-man. 

SM이 하이브의 적대적 인수를 반대하는 이유 https://t.co/fIDPaPJbti

The reason why SM is against HYBE's hostile takeover https://t.co/FrrYdV7xln #SMTOWN #SMentertainment

— SMTOWN (@SMTOWNGLOBAL) February 20, 2023

In the video, SM Entertainment CFO Jang Cheol Hyuk alleges that HYBE's takeover is "far from sound or rational", sharing that they did not request SM Entertainment's due diligence during the acquisition and did not follow the proper procedures and processes. 

Referring to it as a "hostile takeover attempt", Jang goes on further to list out the negative consequences of HYBE's acquisition, explaining that it not only decreases SM Entertainment's corporate value and independence but also that it will negatively affect the whole of the K-pop industry and halt creative diversity. According to Jang, the takeover will put SM artists, staff, and fans at risk. 

"In the Korean entertainment market, the artists have put in their highest endeavours while the entertainment agencies have engaged in constructive competition. This has enabled K-pop to achieve its current global popularity and fandom. However, if HYBE takes the majority of the market share by acquiring SM's managerial rights, K-pop would lose opportunities for greater advancement forward," said Jang. 

Jang concludes the video by stating that they will be working to push back against HYBE's acquisition and maintain SM's identity. "SM will continue to oppose hostile takeovers by certain major shareholders/group whose business interests may adversely affect SM and will do our best to protect shareholder rights by establishing a sound and transparent governance structure," said Jang. 

HYBE currently sits as the largest single major shareholder of SM Entertainment, owning a 14.8% stake in the company after acquiring Lee Soo-man's shares on 9 February. In a statement, HYBE announced that they are currently in the process of acquiring additional shares in order to protect the interest of SM's minority shareholders. 

News of HYBE's acquisition comes after Kakao Corp's previously acquired 9.08% shares of SM Entertainment, a move that Lee Soo-man publicly opposed and referred to as "an act of illegality".