It is interpreted as a move aimed at entering the K-pop market ahead of the lifting of the Korean Wave ban in China.
According to Bloomberg News, Tencent announced that it will purchase 2.2 million shares of SM Entertainment from BTS agency Hive at 110,000 won per share. This is a 15.3 percent discount from the closing price of the day.
Bloomberg said, “The acquisition comes as China is expected to lift the ban on K-pop performances (Korean ban), which has been in place for nearly a decade. Through this, Korean companies such as SM Entertainment may resume distribution of music through their relationship with Tencent.”
The deal is drawing attention in conjunction with the industry’s forecast that China will soon lift the ban, which has been in place since 2016.
China virtually blocked the distribution of Korean Wave contents in 2016 in protest against South Korea’s decision to allow the deployment of the Terminal High Altitude Area Defense (THAAD) system in South Korea. At that time, China was one of the fastest growing markets for K-pop.
Tencent is expected to expand its presence in the Korean music industry in earnest through this investment. Tencent already has 4.3 percent stake in YG Entertainment and 5.95 percent in Kakao. Kakao is currently SM’s largest shareholder.
Meanwhile, Hive said the sale is part of a “non-core asset cleanup” and plans to use the funds secured to expand the business in the future.
Analysts say the deal will put an end to the SM Entertainment management dispute that took place in 2023. At that time, it almost became the largest deal in the domestic media industry as Hive and Kakao competed to acquire SM Entertainment, but Hive gave up the deal when the acquisition price became too high due to rising stock prices. In the process, Kakao founder Kim Bum-soo was indicted on charges of manipulating the stock price of SM Entertainment.
JENNIFER KIM
US ASIA JOURNAL
