HYBE to sell SM Entertainment shares to Tencent for $177 mn

HYBE lost its bid to take control of SM Entertainment to Kakao in 2023

HYBE Co., the second largest shareholder of SM Entertainment Co., is set to sell its remaining shares in the K-pop pioneer to Tencent Music Entertainment Group for 243.4 billion won ($177 million) amid growing expectations that China will likely lift its nine-year ban on Korean pop culture.

HYBE, the company behind boy band BTS, is set to unload 2,212,237 shares of SM Entertainment at 110,000 won apiece to Tencent after the close of the domestic stock market close on May 30, according to its regulatory filing on Tuesday.

The shares represent a 9.66% stake, making Tencent the second largest shareholder after Kakao Corp. and Kakao Entertainment Corp., which hold a combined 41.5% stake in SM Entertainment.

Since losing a fierce battle for control of SM Entertainment to Kakao, South Korea’s dominant mobile platform, in 2023, HYBE has been gradually selling shares in the K-pop powerhouse.

“We are divesting non-core assets to sharpen our strategic focus. The proceeds will be used to secure new growth drivers,” said a HYBE official.

SM Entertainment held global promotional events in partnership with Tencent Music to celebrate its 30th anniversary in early 2025

In 2023, HYBE acquired a 14.8% stake from the latter’s founder and former Chief Producer Lee Soo-man and later secured an additional 0.98% stake in the latter through a tender offer in a takeover attempt.

Analysts welcomed the stake deal for SM Entertainment.

“With Tencent becoming SM’s second largest shareholder, SM stands to gain significantly if China eases its ban on Korean cultural content,” Lee Ki-hoon, an analyst at Hana Securities, said in a note released on Wednesday.

“Now that Tencent is investing in SM following its investment in Kakao, they will be able to generate various synergies in the Chinese market,” he added.

SM Entertainment debuted Hearts2Hearts, a new eight-member girl group, in February 2025

Tencent had purchased shares in Kakao Corp. in the early 2010s. It holds a 6.01% stake in the parent of Kakao Entertainment as the No. 4 shareholder.

In response to HYBE’s announcement of its share sale, SM Entertainment said: “We’ll strengthen our collaboration with Tencent Music Entertainment.”

By Yeonhee Kim

yhkim@hankyung.com

Jennifer Nicholson-Breen edited this article.

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