(LEAD) SM Entertainment to terminate production contract with Lee Soo-man

(ATTN: UPDATES with background info in paras 2, 4-7, reaction by investors in 8th para)

SEOUL, Oct. 14 (Yonhap) -- SM Entertainment announced Friday that it will sever ties with its chief producer Lee Soo-man at the end of this year.

SM said its board of directors convened a meeting and decided to terminate a production license contract with Like Planning, a music production company owned by Lee, on Dec. 31, one year earlier than scheduled.

The singer-turned-music producer founded the K-pop company in 1995 and has been behind the production of SM's leading artists such as Girls' Generation, EXO, Super Junior, NCT and aespa.

SM has outsourced the production to Like Planning and paid tens of billions of won (millions of US dollars) in royalties to the company every year. Lee is the largest shareholder of SM, holding 18.73 percent as of now.

The early termination of contract came as investors led by Align Partners Capital Management, which owns 1.1 percent of SM, have criticized the two companies' dubious ties as "damaging shareholder value" and demanded the agency sever ties with Like Planning for months.

SM paid 11.4 billion won (US$7.9 million) to Like Planning in the first half of this year, which represents 29.6 percent of 38.6 billion won the company earned in operating profits during the same period.

As the criticism continued, negatively affecting the agency's stock prices, Lee unveiled his intention to terminate the contract earlier than scheduled, last month.

Align Partners Capital Management instantly welcomed SM Entertainment's decision, but SM did not release its position.

sshim@yna.co.kr
(END)