Tencent Music acquires nearly 10% stake in SM Entertainment

Tencent Music Entertainment Hong Kong has acquired nearly a 10% stake in major K-pop agency SM Entertainment, making it the second-largest shareholder.

According to a regulatory filing on Repository of Korea's Corporate Filings, HYBE, the management agency for K-pop boy group BTS and girl group LE SSERAFIM, has planned to sell its 2.2 million shares in SM Entertainment to Tencent Music Entertainment for US$177 million on 30 May.

The 9.7% stake will position Tencent Music as the second-largest shareholder in SM Entertainment, following the 42% controlling stake held by Kakao Corp and its affiliate Kakao Entertainment, according to an SM filing reported by Reuters.

This marks a rare Chinese investment in a South Korean company in recent years, representing the largest Chinese investment in South Korea's entertainment industry since 2016. That year, Beijing enacted an unofficial ban on Korean cultural content, referred to as the "K-wave ban," in response to a diplomatic conflict over missile defenses.

Back in February, Korean media The Korea Economic Daily reported that China might lift its ban on Hallyu, or Korean popular culture, as early as May, signalling a move away from its "wolf warrior" approach. This potentially allows South Korean companies such as SM Entertainment to resume music distribution through their relationship with Tencent, according to Business Times.

On the other hand, HYBE opened its first office in China last month, according to Bloomberg. This marks the company's fourth international branch, following those in Japan, the US, and Latin America.

Established in 1995, SM Entertainment is a major South Korean talent agency and management company, focusing on artist management, planning, and music and film production. Its artists includes Super Junior, Girls' Generation, EXO, Red Velvet, and aespa. 

MARKETING-INTERACTIVE has reached out to Tencent Music Entertainment and HYBE for more information.

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