HYBE-Ithaca merger puts BTS, Justin Bieber under one roof

BTS, Justin Bieber and Ariana Grande will be under the same music label group through a historic M&A deal between HYBE Corporation, formerly Big Hit Entertainment Co., and Ithaca Holdings.

South Korea’s HYBE will acquire a 100% stake in Ithaca Holdings, a US-based integrated media company behind artists including Justin Bieber and Ariana Grande, at 1.186 trillion won ($1.05 billion) according to the company’s announcement on Apr. 2.

“The inevitable joining of HYBE and Ithaca Holdings marks the start of an adventure no one could have possibly imagined,” said HYBE Chairman and CEO Bang Si-hyuk.

The acquisition will be made through Big Hit America, a wholly owned subsidiary of HYBE.

The company will finance the deal through its own funds as well as through investments from outside.

Of the 1.186 trillion won ($1.05 billion) total,  HYBE will fund 1.07 trillion won ($948 million) with its own cash and cashable assets as well as through a 440 billion won ($390 million) rights offering to its current shareholders, and a 180 billion won ($160 million) offering to third parties, including Ithaca’s top management and artists.

Justin Bieber and Ariana Grande will each receive 53,557 shares worth around 11.2 billion won ($10 million) through the third party offering. 

The remaining 116 billion won ($103 million) will be raised locally through US financial institutions.

After the acquisition, Ithaca will be merged with Big Hit America. Ithaca’s shareholders and creditors will be compensated with cash.

Ithaca Holdings is a fully integrated holding company with interests across music, film, television, branding and culture, and is led by SB Projects founder Scooter Braun, who manages some of the biggest names in pop culture, including Justin Bieber, Ariana Grande and Demi Lovato.

Ithaca has built an elite portfolio of M&A and partnerships, including the 2019 acquisition of Atlas Music Publishing, home to songs by artists Ed Sheeran and John Legend.

“This will be the first time HYBE's groundbreaking systems and curation will be integrated in the US market at the onset of an artist's career. Plus, it will help us to continue to further the careers of the artists we already work with,” said Ithaca Holdings CEO Scooter Braun.

HYBE’S GLOBAL AMBITIONS

At a recent earnings conference call HYBE said that it “will pursue both organic and inorganic growth strategies. We will seek new opportunities through M&A or joint ventures with international music labels.”

Analysts interpret that the South Korean music label’s bold push for inorganic growth has largely to do with the sharp decrease in concert revenues due to the pandemic.

The company’s 2020 revenue from concerts and fan meetings recorded 3.4 billion won ($3 million), a drastic 98% decrease from 2019.  Of the annual total, the revenue portion generated from concerts and fan meetings marked only 0.4% in 2020, compared to 32.6% in 2019.

Other factors to consider are the company’s heavy reliance on BTS, as well as the fact that group's members have not yet fulfilled their national military duty.

Thanks to the rising popularity of BTS in virtually all corners of the world, HYBE set a new revenue record in 2020 at 796.3 billion won ($706 million), up 36% from 2019. The growth was largely driven by the revenue from music albums and records, which marked 320.6 billion won ($284 million), up 196% from 2019.

Of HYBE’s 2020 revenue, 40.3% came from music albums and records, whereas the figure was only 18.5% in 2019.

To further drive its revenues beyond the current level, HYBE has also formed an alliance with domestic partners Naver Corp. and YG Entertainment Inc. to expand its fan community platform Weverse.

HYBE’s 2020 revenue from Weverse and other intellectual property also saw a rapid growth of 54% from 168.2 billion won ($149 million) to 259.0 billion ($230 million).

(Correction: In the seventh paragraph, the value of the shares that Justin Bieber and Ariana Grande will receive from the merger deal was corrected to around 11.2 billion won).
 
Write to Jun-ho Cha at chacha@hankyung.com
Daniel Cho edited this article.