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CJ-Keistone Partners deal talks collapse

CJ CGV's movie theater in Yongsan, Seoul,  is empty Jan. 14, as the COVID-19 pandemic continues to spread. / Korea times photo by Bae Woo-han
CJ CGV's movie theater in Yongsan, Seoul, is empty Jan. 14, as the COVID-19 pandemic continues to spread. / Korea times photo by Bae Woo-han

By Kim Jae-heun

The country's largest multiplex cinema chain CJ CGV is looking for new investors to take over its theater business after its sale talks with private equity fund (PEF) Keistone Partners were suspended.

Keistone Partners originally planned to utilize its blind fund and form an additional project fund to acquire CJ Group's multiplex cinema unit. The deal was expected to be closed at the end of the month.

However, investors delayed their decision on the acquisition of CJ CGV, which led to the talks facing an uncertain future. They were worried that the theater business here has been in a recession for too long and that various content providing platforms including over-the-top services have become more viable, which halved CJ CGV's business attractiveness.

The multiplex chain, which has to pay rent and loans to defend its credit rating, is therefore searching for other investors.

A number of medium-sized PEFs are said to have reviewed the deal. Some institutions believes the multiplex cinema chain does not have merit in the market anymore, while others need more time to evaluate its corporate value. Previously, Keistone Partners estimated CJ CGV's enterprise value at 1 trillion won and proceeded with a deal to acquire 20 percent of new shares for 200 billion won.

"CJ CGV is looking for investors who can expand its capital through a blind fund as it is going through a liquidity crisis," an industry source said. "Some of the investors have already signed a non-disclosure agreement with CJ CGV and started reviewing a purchase of new shares in the multiplex cinema chain."

Currently, CJ Group owns a 38.4 percent stake as the largest shareholder of CJ CGV.

Since opening its first movie theater in Gangbyeon, eastern Seoul, in 1998, CJ CGV has expanded its business not only in Korea but also in China, Turkey and Vietnam. It operated 588 branches around the world as of September last year.

However, due to the effect of the COVID-19 pandemic, its overall sales dropped 68.8 percent year-on-year to 155.2 billion won in 2020, and it suffered a 96.8 billion won loss.

In June 2016, CJ CGV borrowed 300 billion won to acquire Turkey's largest cinema chain, Mars Entertainment, in a total return swap, which is due in May.


CJ CGV's movie theater in Yongsan, Seoul,  is empty Jan. 14, as the COVID-19 pandemic continues to spread. / Korea times photo by Bae Woo-han
CJ CGV's movie theater in Yongsan, Seoul, is empty Jan. 14, as the COVID-19 pandemic continues to spread. / Korea times photo by Bae Woo-han

By Kim Jae-heun

The country's largest multiplex cinema chain CJ CGV is looking for new investors to take over its theater business after its sale talks with private equity fund (PEF) Keistone Partners were suspended.

Keistone Partners originally planned to utilize its blind fund and form an additional project fund to acquire CJ Group's multiplex cinema unit. The deal was expected to be closed at the end of the month.

However, investors delayed their decision on the acquisition of CJ CGV, which led to the talks facing an uncertain future. They were worried that the theater business here has been in a recession for too long and that various content providing platforms including over-the-top services have become more viable, which halved CJ CGV's business attractiveness.

The multiplex chain, which has to pay rent and loans to defend its credit rating, is therefore searching for other investors.

A number of medium-sized PEFs are said to have reviewed the deal. Some institutions believes the multiplex cinema chain does not have merit in the market anymore, while others need more time to evaluate its corporate value. Previously, Keistone Partners estimated CJ CGV's enterprise value at 1 trillion won and proceeded with a deal to acquire 20 percent of new shares for 200 billion won.

"CJ CGV is looking for investors who can expand its capital through a blind fund as it is going through a liquidity crisis," an industry source said. "Some of the investors have already signed a non-disclosure agreement with CJ CGV and started reviewing a purchase of new shares in the multiplex cinema chain."

Currently, CJ Group owns a 38.4 percent stake as the largest shareholder of CJ CGV.

Since opening its first movie theater in Gangbyeon, eastern Seoul, in 1998, CJ CGV has expanded its business not only in Korea but also in China, Turkey and Vietnam. It operated 588 branches around the world as of September last year.

However, due to the effect of the COVID-19 pandemic, its overall sales dropped 68.8 percent year-on-year to 155.2 billion won in 2020, and it suffered a 96.8 billion won loss.

In June 2016, CJ CGV borrowed 300 billion won to acquire Turkey's largest cinema chain, Mars Entertainment, in a total return swap, which is due in May.


Kim Jae-heun jhkim@koreatimes.co.kr


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