The executive behind BTS talks about K-pop: we are not "trying to take over the entire industry"

Find out what K-pop would be like in 2023 without the South Korean band BTS 3:55

Hong Kong/Seoul (CNN) --

The billionaire mastermind behind some of the world's biggest K-pop stars rejects accusations that he is trying to monopolize the Korean music industry.

Bang Si-Hyuk, president of HYBE, the management agency behind groups like BTS and NewJeans, says "a lot of misinformation" has clouded his company's attempt to increase its stake in SM Entertainment.

"It would not be correct to say that we are trying to take over the entire industry," Bang told CNN in an exclusive interview in Seoul.

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Bang thus responded to the backlash caused by his company's recent proposal to acquire a larger stake in SM, known for representing successful artists such as NCT 127, EXO, BoA and Girls' Generation.

Last month, HYBE announced that it would become SM's largest shareholder by acquiring a roughly 15% stake in the company for 422.8 billion Korean won ($334.5 million) directly from legendary agency founder Lee. Soo-man, who has been fighting his company management on multiple fronts.

Later, HYBE said that he would try to increase his total stake to 40%, which triggered a scandalous public dispute with the SM management.

The business showdown between the K-pop titans has grabbed the headlines in South Korea.

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Bang Si-Hyuk, who heads the HYBE management agency, spoke to CNN's Richard Quest on Tuesday.

Credit: CNN

Last month, CFO Cheol Hyuk Jang posted a 15-minute video on YouTube titled "The reason why SM is against the hostile takeover of HYBE."

Jang argued that the deal would harm the overall performance of the company's shares, as well as the interests of small shareholders.

Bang rejected this claim, speaking to CNN: "I think it's propaganda to call it a hostile operation. Rather, I think it's a serious problem that management wants to run a... company as they please without having a majority shareholder."

bitter battle

Bang said that detractors of HYBE's move on SM were failing to take into account the full scope and "many different spinoffs of the industry" such as digital music sales, concerts, and merchandise.

"Even through the buying agencies, with all the CDs sold in Korea, [by] SM and HYBE together, it's very difficult for us to monopolize the market," he added.

HYBE agreed to buy its initial stake last month "with the consent of the major shareholder," Bang said, referring to Lee, a music producer known in South Korea as "the godfather of K-pop."

However, in a vicious statement to CNN, SM accused Lee of "damaging shareholder value" by "making joint shareholder proposals" with HYBE.

SM also accused Bang of "distorting" the meaning of a hostile takeover.

"Hostile M&As refer to company mergers and acquisitions made without the consent of the board of directors," the firm said.

"In addition, hostile M&As often take the form of a takeover bid or a proxy fight, which is exactly what HYBE is attempting today."

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Gain control?

SM also reiterated their opinion that despite Bang's assurances, HYBE was trying to carve out a monopoly.

"When the two companies combine, it will create a monopoly and an oligopolistic group of companies that will account for approximately 66% of total market sales," he told CNN.

This could soon become a moot point.

Bokyung Suh, a Korean internet and media analyst at Bernstein, said he believed HYBE's attempt to increase its stake in SM, made through a takeover bid to existing institutional and retail investors, had failed.

SM's shares closed on Wednesday at a higher price than HYBE had offered to investors, suggesting that the latter "has failed to acquire" the additional 25% stake, he told CNN.

The offer was for 120,000 Korean won ($92) per share and ended THIS Wednesday.

Official results are expected next week.

Among the groups that HYBE manages are BTS and girl group NewJeans, pictured during a festival in Seoul in December.

Credit: The Chosunilbo JNS/Imazins/Getty Images

HYBE said that the entire process would conclude on March 6, once the investors' payments have been made.

The company will then announce the result and the next steps, it told CNN on Friday.

When asked for comment, SM referred HYBE to CNN.

Bang seemed not to care as much about the outcome of the takeover bid even before it was concluded.

"I don't think it matters if we were able to take 40% in the pending matter," he said in the interview, recorded on Tuesday.

"I think the [next] general meeting of shareholders is the most important thing. Only when the support is obtained there, we will be able to form the board of directors that we want."

The shareholders' meeting is scheduled for March 31.

"Urgent" need to grow K-pop

The financial battle is being waged at an important time for the sector.

Although K-pop is widely seen as a hot phenomenon, and a huge business opportunity, around the world, the genre "doesn't have as much market share as might be perceived," Bang says.

"Globally, it doesn't take up much of the market. On the other hand, Latin music and Afrobeats are growing very quickly. So where we are, it's more urgent to increase exposure."

Bang said that was why music was becoming more interested in "labels and management companies in the US, to be able to build the infrastructure."

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In 2021, HYBE acquired Ithaca Holdings, home to major global artists like Ariana Grande, Justin Bieber, and Demi Lovato.

Last month, he announced another major US deal to acquire the owner of Quality Control, a hip-hop label that represents popular artists like Migos and Lil Yachty.

Asked if he was worried that the popularity of K-pop would eventually disappear completely, Bang said yes.

"That's my biggest concern. In fact, looking at our export indicators and streaming growth, the slowdown in growth is very clear," he said.

The executive trusts that the lag is "temporary", caused by the recent start of the military service in South Korea of ​​the members of his star band, BTS.

"But I doubt it," Bang said.

-- CNN's Yoonjung Seo, Gawon Bae and Pamela Boykoff contributed to this report.

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