Friday, February 23, 2024

BTS mastermind on K-pop deal: We’re not ‘trying to take over the whole industry’ | CNN Business

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Hong Kong/Seoul
CNN
 — 

The billionaire mastermind behind some of the world’s biggest K-pop stars is pushing back on accusations that he’s trying to monopolize the Korean music industry.

Bang Si-Hyuk, chairman of HYBE, the management agency behind bands including BTS and NewJeans, says “a lot of misinformation” has clouded his company’s bid to raise its stake in SM Entertainment.

“It wouldn’t be correct to say that we’re trying to take over the whole industry,” Bang told CNN in an exclusive interview in Seoul.

He was responding to a backlash sparked by his firm’s recent proposal to acquire a greater stake in SM, which is known for representing hit artists such as NCT 127, EXO, BoA and Girls’ Generation.

Last month, HYBE announced it would become SM’s largest shareholder by picking up a roughly 15% stake in the company for 422.8 billion Korean won ($334.5 million) directly from the agency’s legendary founder, Lee Soo-man, who had been battling his firm’s management on multiple fronts.

HYBE later said it would seek to raise its overall holding to 40%, kicking off a shockingly public spat with the leadership of SM. The corporate mudslinging between the titans of K-pop has dominated headlines in South Korea.

Last month, Chief Financial Officer Cheol Hyuk Jang released a 15-minute video on YouTube, titled “The reason why SM is against HYBE’s hostile takeover.”

Jang argued the deal would hurt the company’s overall stock performance, as well as interests of smaller shareholders.

Bang dismissed that claim, telling CNN: “I think it’s propagandistic to call it a hostile deal. Rather, I think it is a serious problem that management wants to run a … company as they wish without a major shareholder.”

Bang said critics of HYBE’s move on SM weren’t taking into account the full scope and “many different spin-offs of the industry,” such as digital music sales, concerts and merchandise.

“Even through purchasing agencies, with all the CDs sold in Korea, [from] both SM and HYBE combined, it’s very difficult for us to monopolize the market,” he added.

HYBE agreed to buy its initial stake last month “with the consent of the major shareholder,” Bang noted, referring to Lee, a music producer who is widely referred to in South Korea as “the godfather of K-pop.”

But in a blistering statement to CNN, SM accused Lee of “damaging shareholder value” by “making shareholder proposals together” with HYBE.

SM also accused Bang of “distorting” the meaning of a hostile takeover.

“Hostile M&A refers to mergers and acquisitions of companies conducted without the consent of the board of directors,” the firm said. “Also, hostile M&A usually takes the form of a tender offer or proxy fight, which is exactly what HYBE is attempting today.”

SM also reiterated its view that despite Bang’s assurances, HYBE was attempting to forge a monopoly. “When the two companies are combined, a monopoly and oligopolistic group of companies that account for approximately 66% of total market sales will be created,” it told CNN.

It could soon become a moot point.

Bokyung Suh, an analyst of Korea internet and media at Bernstein, said he believed that HYBE’s attempt to raise its stake in SM, made via a tender offer to existing institutional and retail investors, had failed.

SM’s stock closed Wednesday at a price higher than HYBE had offered investors, suggesting the latter had “failed to acquire” the additional 25% stake, he told CNN. The offer was at 120,000 Korean won ($92) per share and ended on Wednesday. Official results are expected next week.

Among the groups HYBE manages are BTS and girl group NewJeans, seen here at a festival in December in Seoul.

HYBE said the entire process would conclude on March 6, once payments from investors are made. The company would then announce the outcome and next steps, it told CNN on Friday. Asked for comment, SM referred CNN to HYBE.

Bang appears to have already shrugged off the outcome of the tender offer even before it ended.

“I don’t think it matters whether we could take 40% in the pending issue,” he said in the interview, which was recorded on Tuesday. “I think the [upcoming] general meeting of shareholders is the most important. Only when the support is obtained there, can we form the board of directors we want.”

The shareholder meeting is scheduled to take place on March 31.

The financial battle is playing out at an important time for the sector.

Though K-pop is generally seen as a red-hot phenomenon — and strong business opportunity — around the world, the genre “is not as hot in the market as you might perceive,” Bang said.

“Globally, it’s not occupying much of the market. On the other hand, Latin music and Afrobeats are very rapidly growing. So being where we are, it is more urgent to increase the exposure.”

Bang said that was the reason he was taking a bigger interest in music “labels and management companies in America, to be able to build the infrastructure.”

In 2021, HYBE acquired Ithaca Holdings, home to top global artists like Ariana Grande, Justin Bieber and Demi Lovato. Last month, it announced another major deal in the United States to acquire the owner of Quality Control, a hip-hop label that represents popular artists including Migos and Lil Yachty.

Asked whether he was worried about the popularity of K-pop eventually fizzling out altogether, Bang said yes.

“That is my major concern. In fact, looking at our export indicators and streaming growth, the slowdown in growth is very clear,” he noted.

The executive said he hoped the lag was “temporary,” caused by the recent start of military service in South Korea for members of his marquee act, BTS.

“But I doubt that,” said Bang.

— CNN’s Yoonjung Seo, Gawon Bae and Pamela Boykoff contributed to this report.

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