HYBE offers to sell $62 mn SM Entertainment shares

HYBE Co., the company behind global sensations BTS and NewJeans, has offered to sell some of its shares in K-pop pioneer SM Entertainment Co. in a block deal estimated at 85 billion won ($62 million), shortly after SM’s girl group aespa released its first full-length album.

HYBE starting book building for the block sale after the market closed on Monday to unload 25-32% of its shareholding in SM Entertainment it acquired last year, according to people with knowledge of the matter.

The entertainment powerhouse, led by renowned K-pop producer Ban Si-hyuk, is the third-largest shareholder in SM with a 12.58% stake as of the end of March.

HYBE offered to sell SM Entertainment shares at 90,531 and 91,968 won, or 4.0-5.5% below the latter’s closing price on Monday and about 25% lower than its purchase price of 120,000 won.

Based on the proposed price range, the block sale, managed by Samsung Securities Co., is expected to fetch up to 85 billion won.

Early last year, HYBE bought a 14.8% stake in SM from the latter’s founder and former Chief Producer Lee Soo-man and an additional 0.98% stake in a tender offer.

It acquired the shares at 120,000 won apiece in a battle with Kakao Entertainment Corp. to win control of SM, home to NCT, Red Velvet and aespa.

But it lost out to Kakao in the competition and has since reduced its stake to 8% in a tender offer launched by Kakao.

In February this year, HYBE’s stake in SM Entertainment increased to 12.58% after the purchase of the remaining 3.64% stake owned by SM’s founder Lee, who exercised his put options as agreed with HYBE last year.

In the first quarter of this year, HYBE booked losses from SM shares, after SM’s share price tumbled to 70,000 won early this year, or 23.4% lower than its purchase price.

The planned block sale comes amid expectations of a rebound in SM share price with the release on Monday of the four-member girl group aespa’s first full-length album four years after its debut.

Expectations of China loosening its import restrictions on K-content also drove SM and other entertainment stocks higher on Monday.

By midday Tuesday, SM shares had wiped out Monday's gains and shed 5% to fall to 91,500 won.

Write to Jun-Ho Cha at chacha@hankyung.com
Yeonhee Kim edited this article.