CJ ENM to Acquire SM Entertainment, Creating a Pop Culture Behemoth

The success of BTS pushed SM Entertainment to seek greater distribution.

CJ ENM to Acquire SM Entertainment, Creating a Pop Culture Behemoth

On October 21, CJ ENM sent a draft memorandum of understanding to SM Entertainment SM엔터테인먼트 (SME) for acquiring 18.72% share of SME, held by the company’s founder Lee Soo-man 이수만. CJ ENM, the entertainment and commerce division of the CJ Group, is among South Korea’s largest distributor of entertainment contents, including TV shows, movies, pop music and performing arts.

CJ ENM valued the whole of SME at between KRW 3t to 4t (USD 2.5b to 3.4b), adding 60% to 100% premium relative to SME’s current share price. Lee is expected to continue running SME after the acquisition. CJ ENM made the generous valuation in order to stay ahead of Kakao Entertainment 카카오 엔터테인먼트 and Naver 네이버, who were also pursuing SME.  

CJ ENM owns several cable TV channels including tvN and OCN, streaming service Tving 티빙 and music labels like AOMG and Amoeba Culture, which could be mobilized to distribute SME’s music. Until recently, SME was considered one of the “Big Three” K-pop production companies, along with YG Entertainment and JYP Entertainment. SME’s founder Lee Soo-man, a folk singer-turned-producer, is credited with creating modern K-pop’s “trainee” system in the late 1990s, resulting in international superstars like BoA 보아 and Aespa 에스파.

But with the world-beating success of BTS 방탄소년단 and their production company HYBE 하이브, SME has been pushed into seeking greater distribution channels.

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