In their current battle for control, SM Entertainment’s management team released a letter to minority shareholders ahead of the scheduled shareholders’ meeting for the end of the month. Its purpose? To ask for support, as the letter stated, “HYBE’s board of directors will naturally give HYBE a new business opportunity (not SM).”
According to Yonhap News, SM Entertainment sent this letter on March 1, 2023, specifically to minority shareholders. On the envelope, there were written promises such as “it is an independent board of directors for all shareholders, not a specific shareholder,” and “a dividend of 1,200 won per share.” It drew attention by circling it “on the recommendation of the (SM) board of directors” and marking it “Proposal for the Completion of All Major Shareholders.”
In the letter, SM’s management stated, “This situation is important that will never happen again in the history of Korean entertainment,” and argued, “The future of our company will change very greatly depending on the decision of shareholders.” The letter stressed that this year’s shareholders’ meeting is the last opportunity to completely address SM’s governance issue, which has been going on for the past decade. This will raise the corporate value to the next level as an entertainment company being the nation’s top artist pool.
The document also held a separate letter to persuade shareholders. The letter asked, “Isn’t it good if SM is acquired by Hive, which is bigger in size and belongs to the same industry?” To which SM’s management replied, “We have no choice but to assign good trainees, good songs, good choreographers, and performance plans to labels under Big Hit (BTS’s agency), Ador (New Jeans’ agency), Source Music (Le Sserafim’s agency), and Pledis (Seventeen’s agency), which have a higher stake than HYBE’s stake in SM.”
The letter stressed, “If HYBE holds only up to 40% of SM’s stake and ordinary shareholders own the remaining 60%, there will be a conflict of interest between SM and HYBE shareholders. HYBE is the largest competitor in the industry that competes for first and second place with SM.”
The letter explained that the management favors Kakao issuing a paid-in capital increase and convertible bonds for 90,000 KRW as opposed to HYBE’s public purchase of 120,000 KRW. SM said, “Kakao’s paid-in capital increase and issuance of convertible bonds are for strategic cooperation with the company. Since the issuance is only 9% in total, we do not have management rights and we can expect sufficient synergy that helps the company’s shareholder value because our business areas hardly overlap with our company.”
Source: Yonhap News