'Hostile Takeover'? SM Entertainment Uploads Video Condemning HYBE's Acquisition
SM Entertainment has dropped another bomb with a video denouncing HYBE Label's acquisition.
Read the video's details here.
SM CFO Jang Cheol Hyuk Claps Back At HYBE's 'Hostile Takeover'
On February 20, SM Entertainment uploaded a video, titled "The reason why SM is against HYBE's hostile takeover."
In the video, SM Entertainment's CFO (Chief Financial Officer) Jang Cheol Hyuk openly revealed numerous points on why they are against HYBE Labels' takeover.
SM and HYBE shared the main spotlight this February, when it reported HYBE's acquisition of SM's shares, making them the highest shareholder.
For his first topic, Jang Cheol Hyuk called out Lee Soo Man's actions. Since the founder had sold his shares to HYBE after SM 3.0 was announced, Jang Cheol Hyuk pointed out that Lee Soo Man's actions an attempt of a "hostile takeover."
He also revealed that on February 9, HYBE has now become SM Entertainment's largest shareholder, with a 14.8 percent of SM's stocks acquired from Lee Soo Man. He claimed that HYBE would likely acquire 40 percent stake through an ongoing transaction.
The CFO assured that these actions are considered as "hostile" since it wasn't discussed with SM's current board.
Jang Cheol Hyuk also alleged that HYBE is planning to expand control inside SM's management and board of directors. He also stated how unlikely it is for HYBE to secure SM's independence, due to lack of communication during the M&A (Mergers and Acquisition) disclosure transaction.
The CFO also acknowledged the people who supports HYBE's takeover, since it can bring benefits and synergy to the music industry. However, he also believed that the profits would only go through HYBE or Lee Soo Man, shrinking SM's growth.
Jang Cheol Hyuk then calls out HYBE for their vague explanation regarding potential collaborations. While the acquisition's plan is to spread synergy on numerous business areas, HYBE didn't specify the synergy intended. He requested HYBE to clarify what SM would get from the acquisition.
"HYBE's CEO promised to guarantee the SM's independent management, but I can attest to how hollow this pledge is and how challenging it is to uphold. HYBE hasn't requested SM diligence material throughout the M&A disclosure process."
"Around 1 trillion won will be invested in this transaction, according to HYBE's tender offering and purchase of existing shares. To pay for this transaction, HYBE will make a short-term loan."
"It should have been up for discussion at HYBE's Board of Directors in this case of significant borrowing. Nevertheless, it is unclear how the board settled a matter involving ₩1.00 trillion KRW or more."
"We oblige HYBE to specify what synergies the acquisition would provide to SM and if it would be advantageous to HYBE or SM shareholders."
Cheol Hyuk Jang Shares Thoughts Regarding The Merge's Effect on K-pop Industry
The CFO also expressed his worry for K-pop since the industry will possibly wear off its diversity when HYBE and SM Entertainment merges. The CFO also declared that K-pop fans will also be affected because of the monopoly's increase on ticket prices.
He also brought up SM's employees have resisted to HYBE's "hostile takeover." In an anonymous survey, the CFO disclosed that 85 percent of employees have opposed the arrangement.
Jang Cheol Hyuk also urged the shareholders to support the company and reject HYBE's tender offer by waiting out SM Entertainment's full disclosure about the SM 3.0 model.
"SM and HYBE's merging would fasten ticket price increases, adding strain to K-pop fans and artists."
"Most of the staff who have worked together to build SM are speaking out against HYBE's hostile takeover. On a confidential survey, 85% of employees are against HYBE's acquisition of SM."
"Many of the shareholders are considering your options in response to HYBE's tender offer. I believe not responding would be advantageous for our shareholders."
"Please stay tuned to our upcoming announcement about the SM 3.0 plan, which will increase shareholder and fan value."
Watch the full video here:
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