Kakao Entertainment nears deal to buy SM Entertainment Deal is expected to be signed as soon as next week

Translated by Ryu Ho-joung 공개 2022-05-18 08:15:30

이 기사는 2022년 05월 18일 08:13 더벨 유료페이지에 표출된 기사입니다.

Kakao Entertainment is nearing a deal to acquire a controlling stake in SM Entertainment, about two months after the company behind K-pop groups like Aespa and NCT started talks with Kakao Corp’s entertainment unit over the sale.

“The talks between Kakao and SM Entertainment, which began in March, are in the final stages,” a source familiar with the matter said. “A share purchase agreement is expected to be signed as soon as next week or the week after at the latest.”

Kakao Entertainment will buy an 18.53% stake in SM Entertainment held by its founder and chief producer Lee Soo-man. The price for the stake was tentatively agreed at around 630 billion won ($493.4 million), but the final price could be adjusted lower because of the recent drop in SM Entertainment’s share price.

Assuming the price of 630 billion won, which includes a control premium of about 300 billion won, the deal will value the entertainment company’s total equity at about 3.4 trillion won.

Lee started looking for a buyer for his controlling stake in SM Entertainment a year ago. Naver and Kakao, which have been doubling down on content, expressed interest in acquiring the company at the beginning of the sale process.

Earlier this year, CJ ENM entered negotiations with SM Entertainment, emerging as the frontrunner to acquire Lee’s stake. However, the two sides ultimately failed to reach an agreement.

“From what I understand, several global content companies also showed interest in buying SM Entertainment, but they couldn’t overturn the situation because Kakao was already in advanced talks with SM Entertainment,” an industry insider said.

Kakao Entertainment’s pursuit of SM Entertainment is part of its efforts to expand its business into the video streaming service market. Kakao Entertainment also probably wants to further scale by acquiring one of the country’s major music labels ahead of its planned initial public offering. It is reportedly targeting to be valued at up to 20 trillion won in its IPO. (Reporting by Ha-na Suh)
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