SM mulls ending producer contract with founder Lee Soo-man's firm

SM Entertainment Co. announced Thursday it is considering terminating the production contract with Like Planning, wholly owned by its founder Lee Soo-man.

The agency elaborated that Lee has expressed his wish to cancel the contract with the K-pop label by the end of this year. 

Lee received 11.4 billion won ($8.2 million) in royalties from SM Entertainment in the first half of this year from the boutique firm, a whopping 30% of its operating revenue during that period. 

Last year, Lee raked in 24 billion won from SM in connection with Like Planning. 

Legal experts says a breach of trust could apply. 

In February, Seoul-based Align Partners Capital Management mustered support from other shareholders to seat a new outside auditor in order to improve governance at SM Entertainment.

Shareholders are hopeful that better governance will contribute to a boost in the price of SM shares.

Those familiar with the latest development said the takeover of Lee’s 18.27% stake in the company will speed up if and when the early termination goes through.  

Earlier this year, Kakao Entertainment Corp. reportedly hit a snag in its talks to buy a controlling stake in SM Entertainment.

The entertainment giant behind Aespa, Super Junior, and other mega acts said nothing is set in stone.  

In response to the company's announcement, SM Entertainment's share price soared 18.6% to close at 76,500 won, compared with a 0.8% dip in the broader Kospi index.

Write to Hee-Kyung Kim at hkkim@hankyung.com
Jee Abbey Lee edited this article.