The two will team up to pursue joint management projects together including global K-pop auditions, management and music distribution businesses, Kakao said in an emailed statement.
"We hope to work together in competing in the heavily contested global music and content market through this investment," said Kakao Chief Investment Officer Bae Jae-hyun.
The move will see Kakao acquire 112 billion won worth of shares in SM Entertainment as well as convertible bonds worth 105 billion won, becoming the second-largest shareholder of the company when the deal is complete.
Describing the deal as a "happy ending" to speculation about a tie up dating back to May 2021, SM Entertainment said the capital raised through this deal will fund its new business strategy dubbed "SM 3.0" - establishing multiple production centres and labels as well as a music publishing-specialised subsidiary.
"Based on profitable financial performances thanks to (our) intellectual property, we plan to acquire labels and invest in new businesses such as the metaverse," Lee Sung-su, Co-CEO of SM Entertainment, said while explaining the strategy in a video conference uploaded on its YouTube channel on Friday.
Earlier this month, Kakao said its unit Kakao Entertainment had secured a $955 million investment from leading sovereign wealth funds to accelerate its global growth plans.
($1 = 1,255.9300 won)
(Reporting by Hyunsu Yim; Editing by Kim Coghill, Tom Hogue and Lincoln Feast.)
By Hyunsu Yim
