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Photo: SM Entertainment |
[Alpha Biz= Kim Jisun] SM Entertainment’s attempt to sell its drama production subsidiary KeyEast has collapsed for the second time this year, as concerns over the buyer’s funding capacity materialized. The repeated failures are expected to complicate efforts to find a new owner in the near term.
According to a filing with South Korea’s Financial Supervisory Service on the 21st, KeyEast disclosed that its share sale agreement with SM Entertainment and ERO Investment Fund No.1 was terminated due to the buyer’s failure to pay the remaining balance.
Under the agreement signed in October, SM was to sell a 33.71% stake in KeyEast (6.59 million shares) for KRW 34 billion. However, the buyer failed to pay the remaining KRW 27.2 billion by the transaction’s closing date on December 18, prompting SM to cancel the deal.
The breakdown had been widely anticipated, as ERO Investment Fund No.1 is a newly established entity with an unclear funding source, raising doubts about its ability to finance the acquisition. The transaction schedule had already been revised once to allow additional time for payment.
KeyEast’s prolonged earnings weakness has also weighed on the sale. The company has posted net losses for five consecutive years, including KRW 11 billion last year and KRW 3 billion in cumulative losses as of the third quarter this year.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
