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SM acquires entertainment firms

Mar 15,2018
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Lee Su-man, chairman of SM Entertainment, left, and Bae Yong-joon, chief strategy officer at KeyEast Entertainment. [SM ENTERTAINMENT, ILGAN SPORTS]
SM Entertainment, a major Korean talent agency, announced plans to acquire majority stakes in KeyEast Entertainment, a smaller agency run by first-generation Hallyu (Korean cultural wave) star Bae Yong-joon, and FNC Add Culture, a production company.

SM said in a regulatory filing Wednesday that it would purchase a 25.12 percent stake in KeyEast Entertainment from the largest stakeholder, Bae, for 50 billion won ($46.88 billion). SM will pay Bae 15 billion won in cash, while the rest will be paid out to Bae in the form of SM shares.

“After securing a controlling stake in KeyEast, SM Entertainment will actively push in the digital entertainment and platform sectors,” SM said in a statement.

As part of the acquisition, SM will take control of KeyEast’s Digital Adventure (DA), the biggest Hallyu content platform in Japan.

Even before the acquisition, SM had its eyes on KeyEast. In 2016, SM Entertainment Japan became the second-biggest stakeholder in DA after purchasing stock in the company.

Home to popular actors like Kim Soo-hyun and Ju Ji-hoon, stars from KeyEast are expected to have better career opportunities abroad thanks the latest acquisition.

Under the roof of SM, which has produced world-famous pop stars like Exo, Girls’ Generation and BoA, KeyEast and DA’s management of artists, Hallyu content and fan meet-up events are also forecast to run more smoothly and effectively.

Following the purchase of shares, Bae, who shot to stardom through the 2002 drama “Winter Sonata,” will take part in the management of SM Entertainment by working as the agency’s global strategy adviser.

“SM [Entertainment] has been working together with KeyEast Entertainment on affiliated business projects through SM’s investment in DA,” said Kim Young-min, SM’s chief strategy officer.

Kim explained that by being recreated into a single group, SM will not only grow into “the best artist management and Hallyu media company” by strengthening the two agencies’ strengths, but will also actively work on developing diverse entertainment content and stars as well as global entertainment platform businesses based on live streaming and user created games.

In a separate filing, SM announced it will purchase a 31 percent stake in FNC Add Culture, becoming its biggest stakeholder, followed by FNC Entertainment.

An affiliate of FNC Entertainment, home to prominent entertainers like Yu Jae-seok and Song Eun-i, FNC Add Culture will work together with SM to achieve a more powerful standing in the business of broadcasting, online and mobile networks through the star power of FNC Add Culture’s entertainers. It is also aiming to run a global project following the new alliance.

“With the synergy of SM, various projects involving dramas and broadcasting production will get a further boost [from the acquisition]. Moreover, the agency will push ahead with a more diverse global lifestyle business including retail, food and beverage, fashion, and leisure,” a representative from FNC Add Culture said.

SM’s biggest benefit from the latest acquisition will be the strengthening of its content production abilities.

“Content production businesses that were previously jumbled up will be centralized through SM’s acquisition of KeyEast and FNC Add Culture,” said analyst Lee Sang-heon from Hi Investment & Securities. “The fact that it will be able to vertically integrate content businesses is the biggest gain for SM.”

But there are concerns that SM’s acquisition of smaller entertainment companies could lead to the company being too dominant in the industry.

“SM’s acquisition of KeyEast and FNC Add Culture could create synergy and a positive influence on the entertainment industry as a whole, including expanding its abilities to branch out abroad. But there also are concerns of monopoly,” said culture critic Ha Jae-geun, who expressed concerns over lowered diversity in content and the number of celebrities appearing in that content.

BY SUNG JI-EUN, JIN MIN-JI [sung.jieun@joongang.co.kr]