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Kakao is the leading candidate to acquire SM Entertainment, but it was reported that it is having trouble with its attempt to buy it because Lee Soo Man, SME's founder, continues to make demands.
According to The Korea Times, Lee has been requesting his continuous involvement in the management of SM Entertainment even after the sale has been completed. Kakao may be having problems with this request since the company's founder is already selling his entire 18.27% stake in SM to them.
In addition, Lee Soo Man reportedly wants SME to retain a contract with his own personal content-producing company affiliate, Like Planning. He would like SM Entertainment and Like Planning's producing contract to continue even after the deal with Kakao is sealed.
Last week, the acquisition agreement between SME and Kakao Entertainment appeared to be in the final stage and very close to completing the transaction since the latter already agreed to pay Lee's requested amount for his stake, which is between ₩600 billion or $492.9 million and ₩1 trillion won.
But then, the entertainment agency's founder was said to have asked once again to make sure that his management authority in SME will remain intact. As a result, the contract is still unsigned.
"I think Kakao cannot simply accept Lee's demands, because they go against the way it does business," an official in the business said. "The platform firm which has been engulfed in a range of criticisms in recent months desperately needs SM Entertainment for its competitive media content. But Kakao has no other choice but to give up on SM if Lee continues making such demands."
Last month, Korea Economic Daily reported that Kakao Entertainment Corp. is in the final phase of talks to acquire a controlling stake in SME. At that time, it was said that deal will be closed within a month and while the process has been going smoothly at first, the latest development apparently hindered the completion of the agreement.
Meanwhile, if Kakao and SM Entertainment are able to finally close their deal, the acquisition is expected to put Kakao on par with HYBE and YG Entertainment. This is because Lee Soo Man's company currently holds 20% of the entertainment market share in the country.
