HYBE is raising $380m to fund more music acquisitions in the US (report)
HYBE, the music company behind K-pop superstars BTS and rising stars New Jeans, is looking to raise around 500 billion Korean won (approx USD $380m) to fund acquisitions in the US.
That’s according to Bloomberg, which, citing people familiar with the matter, reports that the South Korean entertainment giant “is in talks with investors to secure equity financing”.
The report adds, citing those same people, that HYBE “is open to having both strategic and financial partners”.
HYBE chairman Bang Si-Hyuk has been vocal this year about his company’s ambitions to expand its global presence via M&A and diversify its sphere of influence beyond K-Pop in the global music business.
In March, he explained his company’s US M&A strategy in an interview with CNN, noting that “globally, [K-pop] is not occupying much of the market”.
He added: “On the other hand, Latin music and afrobeats is very rapidly growing. So being where we are, it is more urgent to increase the exposure. For that purpose, I’m taking over labels and management companies in America to be able to build the infrastructure.”
HYBE’s USD $1 billion-plus acquisition of Scooter Braun’s US-based Ithaca Holdings in 2021 brought various successful non-K-pop operations into HYBE (via HYBE America).
These included country music giant, Big Machine Label Group, plus Braun’s own management company, SB Projects (home to Justin Bieber and Ariana Grande).
In February, HYBE secured yet another foothold in the US entertainment business when HYBE America, led by Braun, acquired Atlanta rap powerhouse QC Media Holdings or Quality Control, home to acts such as Lil Baby, Migos, Lil Yachty and City Girls.
The deal was worth $300 million in total, according to Korean regulator filings – with $250 million of that figure paid in cash, and the rest in HYBE stock. (Raine Group is understood to have priced QC.)
That acquisition arrived as a bidding war broke out between HYBE and South Korea’s Kakao Entertainment for rival K-pop company, SM Entertainment.
In February HYBE acquired a 14.8% stake in SM Entertainment, for around USD $335 million, via the acquisition of shares from Lee Soo-man, SM Entertainment’s estranged founder.
HYBE planned to acquire a 40% stake in SM Entertainment, but officially ended its takeover bid on March 12. Kakao Corp. is now the largest shareholder in SM Entertainment. Bloomberg reports that HYBE still owns around an 8.95% stake in SM.
Although HYBE didn’t take control of its rival, it did manage to expand its reach to fans of SM Entertainment artists via the addition of the latter company’s artists to its Weverse superfan platform.
SM’s artists – which include acts such as EXO, Girls Generation, Red Velvet and aespa – will move onto the Weverse platform later this year.
Universal Music Group artists have also previously joined the app. (UMG has inked multi-territory distribution and marketing partnerships with HYBE, including one for BTS, in the past two years.)
Weverse forms a key part of HYBE’s global strategy. The company revealed in its Q1 investor presentation that it plans to launch a subscription-based membership tier on the app in Q3 2023. Weverse’s Monthly Active Users grew 10% in Q1 versus Q4 2022 to 9.3 million MAUs.
HYBE’s US M&A strategy also forms part of a broader vision to compete with the world’s biggest record companies across multiple genres with a multi-label system reminiscent of the traditional major label structure.
HYBE CEO Jiwon Park wasn’t shy in declaring this ambition back in February in an open letter confirming HYBE’s acquisition of a 14.8% stake in its rival SM Entertainment.
“K-pop flourished in an environment where we could challenge ourselves,” he wrote at the time. “We should conserve the ground so that we can stand shoulder-to-shoulder with the world’s major record labels.”
Park also expanded on HYBE’s “multi-label structure” strategy in a separate letter to shareholders in October last year when he detailed a plan to soften the blow of the hiatus of its flagship K-Pop group BTS, who have, historically been its biggest earner.
“WE ARE LOOKING TO [MERGE WITH/ACQUIRE] VARIOUS LABELS, MANAGEMENT [FIRMS] AND ANY OTHER COMPANIES THAT PURSUE BUSINESSES RELATED TO MUSICAL INTELLECTUAL PROPERTY.”
HYBE STATEMENT, NOVEMBER 2022
This idea was further fleshed out by HYBE for its investors a month later (November 2022), with the company telling shareholders that it was actively and strategically “looking to M&As and establishing joint ventures so that we may expand on our multi-label structure both in and outside of Korea”.
Added HYBE: “We are looking to [merge with/acquire] various labels, management [firms] and any other companies that pursue businesses related to musical intellectual property.”
On the issue of BTS’s absence, HYBE’s Q1 financial results provided strong evidence that the company is able to generate significant revenues in the absence of an active schedule from the superstar group.
Sales of albums released by HYBE artists in Q1 grew by a whopping 185.1% YoY to 184.28 billion South Korea Won ($137.4m).
Plus, HYBE act Seventeen’s album FML racked up 4.64 million preorders, making it the most-preordered K-Pop album of all time, beating a record set by BTS in 2020. Their Map of the Soul: 7 received 4.02 million pre-orders.Music Business Worldwide