Hybe Co., Ltd. · KRX:352820
Hybe — Proxy Contest (March 2023)
49 slides from Hybe's proxy contest presentation, March 2023
Slide 1: SM Shareholder Proposal: Background and Proposal Overview
SM SHAREHOLDER PROPOSAL BACKGROUND AND MAR, 2023 PROPOSAL OVERVIEW DISCLAIMER This presentation (the “Presentation”) prepared by HYBE Co. Ltd. (“HYBE”) is provided for informational purposes only. The information contained herein does not purport to be all-inclusive and none of HYBE or its directors
Slide 2: Executive Summary
Though SM claims that their 3.0 strategy promises a completely renewed The significant overlap between the external director candidates’ EXECUTIVE SUMMARY SM, it must not be overlooked that their internal director candidates expertise is concerning as well. Having focused only on increasing the share
Slide 3: Proposal Background
SM SHAREHOLDER PROPOSAL PROPOSAL BACKGROUND
Slide 4: Transaction Overview - Steps towards a friendly takeover
TRANSACTION OVERVIEW - Steps towards a friendly takeover HYBE, as part of a friendly takeover, has acquired SM shares of the largest shareholder and will acquire additional stake via tender offer Key milestones Change in shareholding status Date Event Remarks 2023.02.09 SPA signed for the acquisition
Slide 5: Transaction Overview - Prevention of further profit leakage
TRANSACTION OVERVIEW - Prevention of further profit leakage HYBE has purchased both shares of SM and key affiliates to prevent profit leakage to the largest shareholder, and eliminated the continued payment to Like Planning’s hidden sunset clause Cleaning up the subsidiary shares held by the largest sh
Slide 6: Violation of Shareholder Rights - SM's business contract with Kakao
VIOLATION OF SHAREHOLDER RIGHTS - SM’s ‘unjustified’ business contract with Kakao It is has been found that SM signed a contract with Kakao that undermines shareholder value Articles that damage shareholder value Reasons these are unfavorable to SM ● Kakao granted exclusive rights to SM’s domestic d
Slide 7: Violation of Shareholder Rights - SM 3.0's unrealistic financial projections
VIOLATION OF SHAREHOLDER RIGHTS - SM 3.0’s unrealistic financial projections While the strategic business direction is positive, SM proposed unvalidated short-term rapid growth projections, confusing the shareholders SM 3.0 financial projections Key points that should be considered Increase in the n
Slide 8: Violation of Shareholder Rights - Misleading communications strategy
VIOLATION OF SHAREHOLDER RIGHTS - Misleading communications strategy SM’s management is spreading misleading information that HYBE’s shareholder proposal, which aims to establish a more transparent governance structure and support growth strategies, is a “shareholder proposal by the profit-taking lar
Slide 9: HYBE's Shareholder Proposal
HYBE’s SHAREHOLDER PROPOSAL HYBE, therefore, submitted a shareholder proposal and recommended a shareholder return policy to maximize shareholder value Revisions to the Articles The Board of Directors The Board of Directors of Incorporation Revisions to the articles of Internal directors who have Ex
Slide 10: Shareholder Proposal Summary
SM SHAREHOLDER PROPOSAL SHAREHOLDER PROPOSAL SUMMARY
Slide 11: HYBE's Proposal - Board of director candidates
HYBE’S PROPOSAL - Board of director candidates HYBE proposes BOD candidates who possess an extensive experience relevant to SM’s current and future businesses, as well as expertise in the legal/financial/governance areas needed for successful business operations Ent./ Business Business IT/ Finance/ I
Slide 12: SM's Proposal - Board of director candidates
SM’S PROPOSAL - Board of director candidates SM's proposed candidates lack the expertise required to carry out SM 3.0 Ent./ Business Business IT/ Finance/ Internal Contents Strategy Operations Platform M&As PMI Global Accounting Legal Governance Control ESG SM CFO Cheol-hyuk Jang Internal SM Ent. Ch
Slide 13: SM's Proposal - Internal board of director candidates
SM’S PROPOSAL - Internal board of director candidates The internal director candidates SM proposed have ties with SM’s current management and lack the expertise required to carry out SM 3.0 Internal Director Candidates Cheol-hyuk ● Current CFO of SM One of the key individuals responsible for the wro
Slide 14: SM's Proposal - External board of director candidates
SM’S PROPOSAL - External board of director candidates The credentials of the Board nominees proposed by SM are questionable, considering that there remain issues with the independence of the company's external director recommendation committee and its auditing ethics Issues with SM’s Proposal Screen
Slide 15: HYBE's Proposal - Secure Internal Control and Transparent Decision Making
HYBE’S PROPOSAL - Secure Internal Control and Transparent Decision Making Process HYBE’s proposed governance structure will contribute to solidifying process control and prevention of legal risks at SM New 1. Establishment of the compliance officer system Board of Compliance Directors Officer Strength
Slide 16: Let's Win Together
LET’S WIN TOGETHER HYBE promises to create value with SM’s shareholders, artists, employees and fans
Slide 17: Appendix
SM SHAREHOLDER PROPOSAL APPENDIX
Slide 18: Internal Director Candidates - Jason Lee
INTERNAL DIRECTOR CANDIDATES - Jason Lee Candidate who built HYBE’s fandom business model and spearheaded its global business expansion Areas of Candidate profile experience/ specialties Period Position Company Sector 2021.07 ~ President HYBE America General management, PMI General Biz Operation Str
Slide 19: Internal Director Candidates - Jinsoo Jung
INTERNAL DIRECTOR CANDIDATES - Jinsoo Jung Candidate with expertise in Legal & Compliance, and M&A within the IT/entertainment industry with 30+ years of experience, who can significantly improve SM’s governance transparency and IP risk management Areas of Candidate profile experience/ specialties Pe
Slide 20: Internal Director Candidates - Jin Hwa Lee
INTERNAL DIRECTOR CANDIDATES - Jin Hwa Lee Candidate with expertise in Finance, HR, and Business Planning & Management within the entertainment industry with 18+ years of experience, who is capable of enhancing SM’s financial efficiency and corporate governance, and of realizing its global expansion Ar
Slide 21: External Director Candidates - Well-balanced group of professionals
EXTERNAL DIRECTOR CANDIDATES - Well-balanced group of professionals HYBE’s proposed candidates ensure independence and expertise Candidate profile NAMKYU KANG SOUNMAN HONG DAE-WOONG LIM Legal expert, fit to advise on Public Administration & ESG and Sustainable strengthening SM’s internal Accounting e
Slide 22: Non-Executive Director / Auditor Candidates
NON-EXECUTIVE DIRECTOR / AUDITOR CANDIDATES HYBE’s proposed candidates ensure independence and expertise Candidate profile BYUNGMOO PARK KYU DAM (K.D.) CHOI M&A, company operations, investment expert, Corporate accounting expert, fit to advise on global investment opportunities for who can contribute
Slide 23: Let's Win Together
LET’S WIN TOGETHER HYBE promises to create value with SM’s shareholders, artists, employees and fans
Slide 24: SM Shareholder Proposal: Strategic Vision & Distribution
SM SHAREHOLDER PROPOSAL STRATEGIC VISION Mar, 2023 & DISTRIBUTION Disclaimer This presentation (the “Presentation”) prepared by HYBE Co. Ltd. (“HYBE”) is provided for informational purposes only. The information contained herein does not purport to be all-inclusive and none of HYBE or its directors,
Slide 25: Views on SM 3.0
SM SHAREHOLDER PROPOSAL Views on SM 3.0
Slide 26: Views on SM - Pioneer of the K-Pop industry
VIEWS ON SM - Pioneer of the K-Pop industry As the pioneer of the K-Pop genre, SM undoubtedly contributed to the growth of the South Korean music industry Attempt at novelty Agility Integrated BM Metaverse themed debut IPTV app service in 2018 Total branding service First introduced aespa as 3D avat
Slide 27: Views on SM - Growth constraints
VIEWS ON SM - Growth constraints However, due to issues such as the current SM management team’s lack of management competence and problems in governance, there were numerous chronic issues in all areas including growth potential, profitability, and enterprise value Reasons for SM’s growth constraint
Slide 28: Views on SM 3.0 - Overview of SM 3.0
VIEWS ON SM 3.0 - Overview of SM 3.0 We are positive of the strategic direction of SM 3.0 - centered around multi-label, multi-production, global expansion and derivative IP and new business launches Key strategies of SM 3.0 Highlights More frequent artist debuts Meritocracy based on Establishment o
Slide 29: Views on SM 3.0
VIEWS ON SM 3.0 Internal Director candidates proposed by HYBE have a well-rounded understanding of SM 3.0 as they have already cultivated and managed HYBE's fandom business model Innovating global music & entertainment through technology Multi Genre Labels Fandom Platform Game & Technology + + -5
Slide 30: Views on SM 3.0 - Multi-label & Multi-producing
VIEWS ON SM 3.0 - 1. Multi-label & Multi-producing The candidates possess a proven track record of success in building and operating a multi-label system that ensures the independence of the production house while amplifying synergy with other business segments HYBE’s success cases with the independ
Slide 31: Views on SM 3.0 - IP BM Diversification
VIEWS ON SM 3.0 - 2. IP BM Diversification Internal Director candidates proposed by HYBE have proven their ability in establishing and operating derivative IP businesses Revenue contribution % as proposed by SM 3.0 HYBE’s actual performance HYBE’s IP BM growth drivers SM 3.0 (Rev in 00 million won)
Slide 32: Views on SM 3.0 - Global business expansion
VIEWS ON SM 3.0 - 3. Global business expansion Internal Director candidates proposed by HYBE also have ample experience encompassing HYBE's global business expansion and local operations Revenue contribution % as proposed by SM 3.0 HYBE’s actual HYBE’s Global growth drivers SM 3.0 (Rev in KRW 00 mil
Slide 33: Views on SM 3.0 - New business engines
VIEWS ON SM 3.0 - 4. New business engines Internal director candidates proposed by HYBE have hands-on development/investment experience related to SM's new business and investment strategy SM’s new business plan SM 3.0 HYBE’s proven presence & results Internalization of Fan platform Expansion of Met
Slide 34: Views on SM 3.0 - Critics on feasibility
VIEWS ON SM 3.0 - Critics on feasibility SM 3.0 needs an overall reassessment of the factors that may limit growth as it aims to pursue simultaneous growth in various business areas SM 3.0 Topic Key Success Factors/ Prerequisites Limitations ● Healthy competitive environment between the different ● T
Slide 35: Win Together
SM SHAREHOLDER PROPOSAL WIN TOGETHER
Slide 36: SM Blueprint
SM BLUEPRINT Our candidates expect SM and HYBE’s partnership to be… with -12
Slide 37: SM Blueprint - Bulgari and LVMH
SM BLUEPRINT …similar to the way BULGARI achieved significant business growth and brand value enhancement after being acquired by LVMH in 2011… with -13
Slide 38: SM Blueprint - Kia and Hyundai Motor Group
SM BLUEPRINT After Kia was acquired by Hyundai Motor Group, both brands realized significant growth with their distinctive brand images with -14
Slide 39: SM Blueprint - Bulgari
SM BLUEPRINT- Bulgari Bulgari successfully grew to be a world-leading luxury brand after being acquired by LVMH while continuing its standalone business operations 130-year-old luxury fashion house Bulgari’s sales more than doubled But growth stunted for years preceding after being acquired by LVMH,
Slide 40: SM Blueprint - Kia post acquisition by Hyundai Motor Group
SM BLUEPRINT- Kia post acquisition by HYUNDAI MOTOR GROUP Kia transformed from a loss-making company 54-year-old auto company to a largely profitable one, with a domestic alone Had difficulty realizing notable growth with market share of c. 32% (was even on the verge of going default in 1997) The combi
Slide 41: Growth Strategy - Direction of Growth Strategy
GROWTH STRATEGY- Direction of Growth Strategy Plausible and effective business plans shall be specified after gaining clearer understanding of the internal situation after the shareholders’ meeting Standalone growth Growth with HYBE Strengthen the infrastructure & internal operation capabilities -17
Slide 42: Growth Strategy - Standalone growth: Focus on Core Music Business
GROWTH STRATEGY- Standalone growth: Focus on Core Music Business Ensure stable growth of new and existing artist businesses in full consideration of fan experiences New artists Existing artists Fan experience Catalog & IP Quality over Quantity Meeting Fan’s Needs Operational Excellence ● Professiona
Slide 43: Growth Strategy - Global expansion
GROWTH STRATEGY- Global expansion A different global expansion strategy will be developed for Japan, North America, and Southeast Asia, optimized to each of the regions’ different environmental and fandom characteristics Points of Consideration for Global Expansion Global Expansion Strategy - Example
Slide 44: Growth Strategy - Growth with HYBE
GROWTH STRATEGY - Growth with HYBE HYBE will work with SM for the globalization of K-Pop by sharing its global network and leveraging improved bargaining power Growth levers with HYBE HYBE and SM’s combined equity value amounts to KRW 10 TN, making a meaningful step towards that of global top 3 musi
Slide 45: Growth Strategy - Reinforcing infrastructure & operational capabilities
GROWTH STRATEGY- Reinforcing infrastructure & operational capabilities Retain human resource and business infrastructure to power growth and quickly achieve operational excellence SM 3.0 Components Key investment areas Human resources Infrastructure Operation process Reinforce compensation system co
Slide 46: Growth and Allocation
SM SHAREHOLDER PROPOSAL GROWTH AND ALLOCATION
Slide 47: Financial Forecasts
FINANCIAL FORECASTS The feasible growth targets that can be met when the business structure in SM 3.0 is recalculated and shared after considering the business status and available resources SM Financial Forecasts (Rev in KRW bn) +@ 1,350 1,210 Revenue SM’s sales, if applying HYBE’s know-hows and gr
Slide 48: Shareholder Return Policy - Aligning management and shareholders' interests
SHAREHOLDER RETURN POLICY - Aligning the management and shareholders’ interests HYBE proposes to maintain a 30% dividend payout ratio for the next 3 years and introduce a compensation system that will strengthen responsible management of growth and shareholder value Shareholder Return Policy Plan Co
Slide 49: Let's Win Together
LET’S WIN TOGETHER HYBE promises to create value with SM’s shareholders, artists, employees and fans