Lee Soo-man's 18.73% Stake up for Sale
News broke out that CJ Group vice chairwoman Lee Mi-kyung returned to Korea in a hurry to meet with Lee Soo-man, chief producer of SM Entertainment, indicating that competition is intensifying among large companies to take over the entertainment company.
CJ Group reportedly expressed its interest in acquiring Lee Soo-man’s 18.73 percent stake in SM Entertainment. It has emerged as a strong competitor of Kakao Entertainment, which is regarded as a strong bidder. Besides the two companies, Hybe has also showed interest in acquiring SM Entertainment.
Up for sale is Lee Soo-man’s stake. As Lee is the largest shareholder of SM Entertainment, acquiring his stake practically means securing the company’s management rights. Industry experts predict that SM Entertainment will face the biggest-ever change since its foundation in 1995.
Securities experts estimate the acquisition price at between 2.5 trillion won and 4 trillion won. Kakao Entertainment reportedly offered 2.5 trillion won to SM Entertainment and Hybe offered a higher price.
Although CJ's proposed price was not known, stock prices of SM Entertainment and its affiliates surged thanks to news reports that CJ participated in the fray. The stock price of SM Entertainment closed at 62,700 won on Aug. 3, up 4.15 percent from the previous day. Stock prices of its affiliates SM C&C and SM Life Design also soared 29.96 percent and 22.20 percent, respectively.
As of the first quarter, SM Entertainment's market capitalization stood at 1,632.4 billion won. As SM Entertainment racked up 579.9 billion won in sales in 2020, industry analysts say that its market capitalization is undervalued. It implies that SM Entertainment has much room to enhance its enterprise value after the planned stake sale.