ENTERTAINMENT
SM opens up about 'Hive acquisition rumor'
On the 10th, SM announced an official statement from SM Entertainment's co-CEOs and management (25 people in higher positions above center director).
On this day, SM said, "With the SM 3.0 era, we are about to transform and take a leap forward as a fan- and shareholder-centered company that is once again leading global entertainment, so we will join together with all executives, employees, and artists to oppose all hostile M&As reported this time." “I clearly state that I will do so,” he announced.
He continued, "The strategic partnership between SM and Kakao announced on the 7th is the first step in SM 3.0 to secure future growth engines for SM's new leap forward, utilizing SM's IP in various ways and strengthening its global capabilities. “I am confident that we will create strong synergy in the process,” he said.
In addition, “We have fully communicated and agreed with Kakao on the meaning of the strategic partnership envisioned by SM. Ultimately, the strategic partnership with Kakao is based on management judgment to accelerate the implementation of SM 3.0 strategy, and is based on the opinions of the largest shareholder. “I would like to say once again that this has nothing to do with the management rights dispute.”
SM admitted, "It is true that we were not aware of the problems with the producing contract early on, and the internal voices pointing out the problems were minimal."
However, "Specific opinions from shareholders and stakeholders began to be presented in earnest last year. Due to the structure in which the largest shareholder alone receives a significant portion of the operating profit each year (from a minimum of 27% to a maximum of 199% from 2015 to 2021), dividends “As issues such as the failure to return to shareholders began to be raised in earnest, even within SM, these problems gradually became vividly realized,” he said.
In addition, "SM conducted an objective review from the beginning regarding the points where shareholders raised conflict of interest issues, and made a variety of efforts with sincerity in preparation for a new future. As a result, former general producer Lee Soo-man said, “We gave notice of early termination of the contract on September 15, and the contract was terminated on December 31, 2022, following the resolution of our board of directors on October 14, 2022,” he added.
Below is the full text of SM Entertainment's official position on the 'Hive acquisition rumor'.
Hello, this is Seongsoo Lee and Youngjun Tak, co-CEOs of SM Entertainment (hereinafter “SM”).
We are issuing this statement expressing the opinions of our co-CEOs and 25 people in higher positions above the center director level.
On February 3rd, SM announced its future core strategy, “SM 3.0, a change from Like Planning’s single production to a multi-production center/label system.” However, as soon as SM 3.0, which envisions this new vision and future, was announced, attempts to sell and acquire shares were being discussed, ignoring not only SM's intense concerns and efforts, but also the values that SM has pursued with artists. It is becoming known.
About 600 executives and employees of SM are working with the dream of becoming the No. 1 global entertainment company, and based on everyone's efforts, many SM artists have proudly led K-POP. Now, as SM is about to transform and leap forward once again into a fan- and shareholder-centered company leading global entertainment through the SM 3.0 era, we are joining forces with all executives, employees, and artists to oppose all hostile M&As being reported this time. Let me state this clearly.
The strategic partnership between SM and Kakao announced on the 7th is the first step in SM 3.0 to secure future growth engines for SM's new leap forward, a process to utilize SM's IP in various ways and strengthen its global capabilities. We are confident that we will create strong synergy. We have fully communicated and agreed with Kakao regarding the meaning of the strategic partnership that SM is envisioning. In the end, we would like to reiterate that the strategic partnership with Kakao was based on management judgment to accelerate the implementation of the SM 3.0 strategy and has nothing to do with the management rights dispute claimed by the largest shareholder.
SM has maintained a producing contract with Like Planning, former producer Lee Soo-man's personal business, since 2004 in relation to how to build and utilize the artist's IP throughout its life cycle. As the founder of SM and a pioneer who created today's K-POP, SM knows better than anyone else about the former producer's capabilities and achievements to date. However, it is true that because we knew too well, we were unable to recognize the problems with the producing contract early on, and the internal voices pointing out the problems were minimal.
However, since last year, shareholders and stakeholders have begun to present specific opinions in earnest. As the issue of dividends and other shareholder returns began to be raised in earnest due to the structure in which the largest shareholder alone receives a significant portion of operating profits each year (from a minimum of 27% to a maximum of 199% from 2015 to 2021), SM also gradually I became vividly aware of these problems. We can no longer ignore the active interest and voices of concern from shareholders and stakeholders who love and encourage SM and its artists more than anyone else.
Accordingly, SM conducted an objective review from the beginning regarding the points where conflicts of interest were raised by shareholders, and made various efforts with sincerity in preparation for a new future. As a result, former general producer Lee Soo-man notified the early termination of the contract on September 15, 2022, and the contract was terminated on December 31, 2022 by the resolution of our board of directors on October 14, 2022.
SM has about 600 employees who come up with ideas day and night and do their best in their respective positions. I know very well how intense the efforts of SM artists are. SM has released about 30 albums in 2022, and for the release of these albums, more than 400 demo songs are internally reviewed every week. From the concept of the album to promotion, there is no place that does not reach the passion and effort of all executives and employees.
Dear SM shareholders and stakeholders,
We will begin a new leap forward through the SM 3.0 era. Moving away from the past when all authority and honor was concentrated in one person, we will show how experts in each field and collective intelligence come together to grow artists together and share the joy and rewards.
SM will take each step toward a new leap forward together with its executives, employees, and shareholders. Please continue to watch and support us. Please look forward to and show interest in the follow-up announcement of the SM 3.0 business strategy to enhance fan and shareholder value.
thank you
Reporter Junho Yoon, Ten Asia delo410@tenasia.co.kr
