The deal encompasses distribution and label services for the group, which was the subject of a BBC One miniseries earlier this year.
The Korean music company, home to BTS, still retains a 9.4% stake in SM Entertainment.
HYBE owns 12.6% of outstanding SM Entertainment shares, up from 8.8% prior to the latest transaction.
The company emphasized "the need for leadership with a new perspective" after a scandal in 2023
The "integrated corporation" in the world's top music market is an expansion of SM and Kakao's existing partnership.
The next step in K-pop’s growth may lie not in music itself, but in exporting K-pop’s disciplined development, production and promotion model.
HYBE still owns an 8.8% stake in the competing K-pop company after Kakao purchased an additional 1.66 million of its shares.
HYBE, which owns a 14.8% stake in the competing K-pop company, criticized the tie-up with tech company Kakao as one-sided and harmful to shareholders.
The parent of Starship Entertainment, which includes Monsta X and other K-pop acts, says the investment will help "spearhead growth in K-culture worldwide."
