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SM Leisure CFO explains opposition to HYBE’s “hostile takeover”

SM Leisure has launched a video of its CFO Jang Cheol-hyuk explaining firm management’s opposition to HYBE’s latest acquisition of a controlling stake within the Ok-pop company.

On February 20, a video titled “The explanation why SM is in opposition to HYBE’s hostile takeover” was printed on the company’s official SMTOWN YouTube account, which normally solely releases content material for its artists. Within the clip, Jang instantly addressed followers of SM’s artists and its shareholders, outlining the company’s view on HYBE’s latest acquisition and what it sees as potential penalties of the merger.

Within the video, Jang claimed that HYBE didn’t request due diligence materials from SM Leisure through the merger and acquisition disclosure course of regardless of the massive scale of the deal – a 1trillion received funding on HYBE’s half, which might require the company to take a short-term mortgage in an effort to finance it, based on HYBE’s regulatory submitting on February 10.

Jang then raised this as a sign that HYBE’s company governance is “removed from sound or rational”, claiming that SM Leisure would “inevitably” be topic to this “weak governance” ought to HYBE take over the corporate, to the detriment of SM’s shareholders and artists.

Jang additionally claimed that the values and pursuits of SM’s shareholders would doubtless not be prioritised within the occasion that HYBE efficiently dominates its board of administrators, and alleged {that a} takeover by HYBE would result in the de-prioritisation of SM artists and their music releases as a result of HYBE’s roster already being “saturated” with artists from its current subsidiaries. Jang additionally claimed that HYBE’s takeover of SM would speed up the rise of live performance ticket costs.

Jang later claimed that HYBE’s takeover of SM would create a monopoly that will finally be detrimental to the Ok-pop business as an entire, citing figures that put the mixed market share of the 2 companies primarily based on income at 66 per cent of the leisure business. “Ok-pop would lose alternatives for a higher development ahead,” claimed Jang. “In the end, Ok-pop followers would be the ones that shall be most affected by the monopoly.”

Moreover, Jang alleged that HYBE “deliberately evaded” scrutiny by Korea’s antitrust authority, the Truthful Commerce Fee, in its acquisition of SM. Based on the CFO, HYBE’s buy of SM founder Lee Soo-man’s 14.8 per cent of SM shares and its tender provide to buy as much as 25 per cent extra shares from minority shareholders was “deliberate concurrently” since they had been introduced on the identical day, and will subsequently be thought-about a single occasion topic to assessment by the Truthful Commerce Fee.

lee soo-man sue sm entertainment kakao entertainmnet violation commercial law
Lee Soo-man. Credit score: Wealthy Polk/Getty Pictures

Jang reiterated SM Leisure management’s opposition to HYBE acquisition and cited an nameless office survey carried out by way of the app Blind which mentioned that 85 per cent of SM Leisure’s staff oppose the takeover. The video concludes by sharing the assertion launched by a collective of 208 SM staff final week during which they introduced their intention to withstand a takeover by HYBE.

Approached for remark by NME, HYBE mentioned in an e-mail: “We’ve got seen the video SM Leisure uploaded at the moment and it doesn’t appear totally different from what they’ve introduced and claimed to this point. HYBE shall be specializing in enhancing SM Leisure’s company governance to revise the corporate’s inside administration construction, in addition to persevering with to maximise shareholder worth.”

The video by Jang follows the discharge of a video by SM CEO Chris Lee (often known as Lee Sung-soo) on Friday, during which the CEO accused HYBE of finishing up a “hostile” takeover of SM Leisure and questioned the method of the acquisition. He additionally introduced his intentions to resign as a CEO and director of SM following the conclusion of the company’s shareholder assembly in March. If all of the board members enable me, I’ll return to my fundamental job within the music division, and work arduous for SM as soon as once more,” he mentioned.

SM’s assertion of its 2022 earnings could be revealed later at the moment, Jang mentioned within the video, and that its “SM 3.0” enterprise, world and funding methods would even be shared at a later date earlier than the deadline of HYBE’s ongoing tender provide to minority shareholders.



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