SEOUL, March 7 (Reuters) -

South Korean tech group Kakao launched a 1.25 trillion won ($962 million) offer for K-pop agency SM Entertainment on Tuesday, escalating a takeover battle with BTS manger HYBE, whose proposal did not to win enough support from SM investors.

The offer sent SM shares up 14% to 148,500 won on Tuesday, just shy of Kakao's tender price of 150,000 won to acquire up to 35% of the entertainment group behind popular K-pop groups such as NCT and Aespa.

The offer by Kakao Corp and its subsidiary Kakao Entertainment comes after a court accepted a request by SM's founder and biggest shareholder Lee Soo-man to block Kakao's earlier deal with SM, which would have made Kakao the second-largest shareholder of the entertainment group.

Lee also sold his 15% stake in the company to rival HYBE, setting up a takeover battle for the company that pioneered the K-pop industry since the Korean folk song singer and creator founded it decades ago.

HYBE, which outgrew SM in recent years thanks to boy band BTS's global success, planned to purchase an additional 25% of SM through a tender offer. But investors did not support its 120,000 won per share offer in light of an expected rival offer from Kakao.

The Kakao group, which already owns nearly 5% of SM, said its plan to control up to 49% of SM would strengthen its strategic partnership with SM.

"Kakao decided it is inevitable to secure the largest shareholder position to protect the partnership with SM Entertainment," Kakao said in a statement.

In January, Kakao Entertainment secured a

1.2 trillion won investment

from leading sovereign wealth funds, making it the biggest overseas financing in a South Korean content company.

HYBE did not have immediate comments on Kakao's tender offer and whether it plans to launch a fresh proposal to SM. ($1 = 1,300.0300 won) (Reporting by Hyunsu Yim; Editing by Lincoln Feast, Miyoung Kim and Gerry Doyle)