Kakao has taken the lead in the dispute over ownership of K-pop agency SM Entertainment after HYBE Corp., the company behind music act BTS, said on March 12 that it has withdrawn its takeover attempt.

SM is the second-largest Korean music talent agency, representing artists such as Super M, Aespa, BoA, and Red Velvet, as well as Girls' Generation, H.O.T., EXO, Super Junior, SHINee, and NCT Dream.

HYBE announced on March 12 that it will "discontinue the acquisition process [...] after observing that the market has been showing signs of overheating due to competition with both Kakao and Kakao Entertainment," something that it said could "damage shareholder value."

Ever since the beginning of February, when HYBE purchased a roughly 15% interest in SM from K-pop pioneer Lee Soo-man, Kakao and HYBE have been embroiled in an increasingly contentious and high-stakes war for ownership of SM. Lee has a schism with the firm he started.

SM promptly responded with an intention to issue shares and convertible bonds, making Kakao and its subsidiary Kakao Entertainment SM's second-largest shareholder with a 9% stake. Lee sought and got a court order prohibiting the problem, closing that door.

Nevertheless, deep-pocketed Kakao retaliated earlier this week with a proposal of KRW 150,000 per share to current stockholders, amounting to over $1 billion for a 35% interest in SM. That greatly outperformed HYBE's open market offer of KRW 120,000 for an additional 25% stake in SM, propelling the stock to a record high of KRW 147,800 at the conclusion of trade on Friday.

HYBE said on Sunday that it had "discussed the matters with Kakao and reached an agreement to suspend the process of acquiring SM’s management rights. Concurrently, the two companies agreed to cooperate on matters related to their platforms.”

Kakao stated in its own announcement that it will proceed to acquire SM shares through March 26 as scheduled under its tender offer.