Naver and Kakao Entertainment Compete for Acquisition of Shares in SM Entertainment

Recent news holds that Kakao Entertainment and Naver, are currently under a very heavy competition against each other in order to acquire shares in SM Entertainment. 

 

Both the companies have been competing to obtain K-Content, that includes webtoons, web novels, and music. The most explicit and fierce part of their battle is purchasing companies through M&A (Mergers and Acquisitions).

 

As both the competitors’ main aim is to expand their advantage in the K-Pop market, obtaining shares in SM Entertainment will increase the dynamic of their aim. Acquisition of shares will pave way for various collaboration possibilities with several popular groups under SM like EXO, NCT, SHINee, Super Junior, Aespa, and Red Velvet.

 

Recently NCT Dream peaked various music charts with their first full length album, ‘Hot Sauce.’ Aespa also ranked 97th on the U.S. Billboard Global 200 Chart with their new track ‘Next Level.’ Aespa is a unique group that combines various universes of AI and has gained great attention from netizens. Collaboration with either Naver or Kakao, two big IT powerhouses, will prove to have a positive impact on increasing Aespa’s presence globally via various formats.

 

According to reports, Kakao Entertainment has presented various possibilities to SM in order to win the acquisition battle against Naver. The possibilities presented to SM include things like potential future synergy between the companies, while proposing multiple acquisition structures to make sufficient transaction prices. A strong point which they presented is the fact that, they have prior experience in management and operations of a record label.

 

Popular Hallyu artists like IU, K.Will, Monsta X, and WJSN are under Kakao Entertainment via the subsidiaries, that include Starship Entertainment and PlayM Entertainment. Another notable fact is that Kakao Entertainment’s parent company, Kakao, operates the nation’s top digital music platform ‘Melon.’ There are plans for Kakao Entertainment to be listed in the domestic (KOSDAQ) or U.S. stock market (NASDAQ) early next year and is hence presently focused on expanding corporate value before going public.

 

Kakao Entertainment have showed their interest in investing in SM Studios, which is set to be launched on the 28th. They are also considering options to make a joint investment with China’s Tencent. There are some predictions that SM will heighten it’s bargaining power by operating and managing drama, entertainment, and new media platform via SM Studios.

 

Naver is said to have a considerable impact in the K-Pop market. It created one of netizens’ most used app, V Live, that gives a glimpse into the everyday lives of K-Pop idols. The company has also fiercely invested in artists. This year they have invested 400 billion KRW in beNX, a subsidiary of HYBE Corporation. Further, Naver is planning to consolidate it’s three-way alliance with YG and HYBE. The company also recently put in efforts to upgrade their content business structure by selecting metaverse markets as their target, via it’s subsidiary ‘Naver Jet.’ Owning M&A capabilities is a great advantage for Naver.

 

Further, attention is given to the impact of acquisition of shares on SM’s stock rates. SM’s fluctuating stock price is the high 20,000 KRW range, which recently crossed 40,000 KRW, based on enlarged album sales and high earnings. The closing price on the 26th is 42,250 KRW and the market capitalization is around to 1 trillion KRW.

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