CJ CGV, South Korea’s leading multiplex, is expected to sell 25 percent of its Southeast Asian business as it seeks to solve a cash crunch, industry sources said on Oct 21.
CJ CGV, listed on the primary Kospi board, said on Oct. 21 in its answer to investors’ request to clarify media reports that the company is currently attracting investments, but nothing has been decided yet.
But industry sources said that MBK, South Korea’s private equity firm, is poised to sign an agreement with CJ CGV to buy 25 percent in a special purpose corporation for 350 billion won ($299 million).
Last month, CJ CGV chose MBK as the preferred bidder for a pre-initial public offering private placement.
The SPC will consist of three businesses in Asia -- China, Vietnam and Indonesia -- and aims to go public in a foreign stock exchange.
Kim Hyun-yong, an analyst at Ebest Investment and Securities, said MBK’s investment in CJ CGV will relieve financial burden and lower the movie chain’s debt ratio by 70-80 percentage points. This is equivalent to the operating values by units in three Southeast Asian countries as high as 1.5 trillion won.
This would relieve the biggest concern for the shares of CJ CGV, noted Kim, who raised the target price of CJ CGV to 50,000 won.
Share prices of CJ CGV closed at 35,000 won, unchanged from the previous trading day on Oct. 21.
CJ CGV launched its office in 2006 in China, Vietnam in 2011 and Indonesia in 2014. The combined three operations create about 40 billion won in operating profit last year.
The multiplex has been cash-strapped since the acquisition of Turkish movie theater chain Mars due to the country’s economic downturn. The losses incurred in Turkey weighed down the Korean company, which wrote off 200 billion won. In 2018, the company recorded a net loss of 188.5 billion won.
To streamline its financial health, the company tried to raise 300 billion won by issuing new stocks last year, but to no avail.
By Park Ga-young (email@example.com)