MBK, Mirae buy stake in Asia assets of Korea's CJ CGV
MBK Partners and Mirae Asset Daewoo Private Equity have agreed to pay KRW333.6 billion ($286 million) for a minority position in the China and Southeast Asia assets of Korean cinema chain operator CJ CGV.
The company plans to consolidate its holdings in China, Vietnam and Indonesia under a single entity, CGI Holdings. It will then issue new shares to the two investors, giving them a 28.57% stake, according to a filing. CJ CGV will have a call option and drag-along rights, enabling it to buy back the shares from MBK and Miraee Asset Daewoo or oblige them to participate in the sale of the entire business.
The reorganization will see CGI assume control of CJ CGV’s 51% interest in Jakarta-listed Graha Layar Prima, operator of 47 cinemas in Indonesia under the CGV Cinemas brand. CGI will merge with IKT Holdings, a CJ CGV-owned entity that holds 28% of Graha Layar and then pay KRW85.1 billion for a 23% stake that CJ CGV owns directly.
CJ CGV entered Indonesia in 2014 by participating in the IPO of Blitzmegaplex, which was then backed by local GP Quvat Management. CJ CGV paid IDR298.9 million ($21.2 million) for 14% and two years later committed KRW50.3 billion to take its stake to 42.77%. It is unclear when the company reached 51%, but the Blitzmegaplex was gradually rebranded as CGV. Graha Layar generated revenue of IDR1.18 trillion in 2018 and a net profit of IDR37 billion. It has a market capitalization of IDR2.75 trillion.
CGI will also pay KRW99.5 billion for full ownership of CJ CGV Vietnam Holdings, which was approved for a Korean IPO last year but ultimately pulled out due to weak demand. CGV has 63 cinemas in the country. Net income from the business came to KRW1.29 billion for the most recent financial year. No financial details were given regarding China, where CGV has 103 cinemas.
CJ CGV also operates 99 cinemas in Turkey, seven in Myanmar, two in the US, and over 200 in Korea. The company’s sales rose 3.5% year-on-year to KRW1.77 trillion in 2018, but over the same period, its net loss widened from KRW152.9 billion to KRW170.4 billion. Operating profit fell 9.9% to KRW77.7 billion. The net debt ratio hit 722% at the end of September. Proceeds from the MBK-Mirae Asset Daewoo transaction will be used to ease CJ CGV’s financial burden and support overseas expansion.
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