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Kakao has acquired a 9.05% stake in SM Entertainment, and with this, it has become the second largest shareholder of the company after its founder, Lee Soo Man. The acquisition was announced by the internet company on Tuesday, Feb. 7.
Kakao has taken the step of merging with SM Entertainment to help boost its competitiveness in the content and music business units. As per The Korea Times, the entertainment firm issued 1.23 million new shares in the form of a paid-in capital increase, while Kakao obtained 1.14 million shares of SME by buying convertible bonds. It was reported that the acquisition deal is worth KRW217 billion or about $172.7 million in US dollars.
In addition, Kakao, Kakao Entertainment, and SM Entertainment also agreed to a three-way business agreement and they are planning to work together to raise the global status of K-culture further through business cooperation in music and content areas.
They will jointly work on future businesses by using tech capabilities like the AI that Kakao has and make use of the "Seoul Arena" cultural facility that will be opened in Chang-dong, Dobong-gu, Seoul. The three firms also have a goal of contributing to the revival of the country's economy by expanding their businesses.
"Through this investment and cooperation, we expect that the two companies will be of great help to each other in responding together to the fierce competition in the global music and content market and targeting the global mainstream of K-content." Kakao Community Investment's chief executive officer, Bae Jae Hyeon, said in a press release. "We will contribute to the expansion of K-Culture's global influence through multifaceted cooperation in the future."
Finally, Kakao will continue to forge partnerships with various businesses in the production and distribution of albums around the world. Kakao Entertainment and SM Entertainment will promote globally through their overseas networks and foreign partners.
