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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] CJ CGV, Korea’s leading cinema chain, has effectively withdrawn from its Asian business holdings as it faces mounting liquidity challenges. The company has decided not to exercise its call option on a key stake in CGI Holdings, paving the way for financial investors MBK Partners and Mirae Asset Securities PE to trigger a drag-along sale of their shares.
According to investment banking sources on August 5, CJ CGV has formally notified the MBK-Mirae Asset consortium of its decision not to repurchase the remaining 17.58% stake in CGI Holdings, the company’s Asian holding arm. This decision grants the consortium the right to bundle its stake with CJ CGV’s shares for sale to a third party.
The consortium is currently in discussions with global investment banks to select a sale advisor. Although a specific timeline has not been confirmed, CJ CGV has expressed its intention to cooperate fully during the due diligence and transaction process once a lead manager is appointed.
The current situation dates back to 2019, when MBK Partners and Mirae Asset Securities PE acquired a 28.57% stake in CGI Holdings for KRW 333.6 billion (approx. USD 280 million), with the expectation of a public listing on the Hong Kong Stock Exchange by June 2023. The deal included a call option for CJ CGV to repurchase the stake and a drag-along right enabling the investors to sell their combined holdings should the IPO fail.
However, the COVID-19 pandemic severely impacted the cinema industry, derailing the listing plans. CGI Holdings posted consecutive net losses of KRW 10 billion in 2022, KRW 19.3 billion in 2023, and KRW 24.4 billion in 2024, disqualifying the company from meeting listing eligibility requirements.
Although CJ CGV bought back part of the stake last July for KRW 126.3 billion to delay the drag-along timeline by a year, it failed to secure enough funds—an estimated KRW 200 billion—for the remaining shares. Its attempts to raise capital through corporate bond issuances in May (KRW 40 billion) and July (KRW 100 billion) both fell through.
Adding to the pressure is a KRW 700 billion convertible bond (CB) call option maturing next year. CJ Group’s ability to provide additional support is also limited, despite previously injecting over KRW 444.4 billion and participating in multiple rights offerings to sustain the cinema business.
This latest development is particularly painful for CJ CGV, as CGI Holdings’ Vietnam operations posted record-breaking results in 2023—KRW 207.2 billion in revenue and KRW 26.3 billion in operating profit—accounting for more than a third of CJ CGV’s total operating profit. However, in a bid to address immediate financial strains, CJ CGV has been forced to let go of one of its most promising international growth engines.
Industry experts point to broader structural challenges in the cinema sector. The rise of over-the-top (OTT) streaming platforms continues to erode theater attendance. According to the Korean Film Council, total box office revenue in 2023 stood at KRW 1.195 trillion—just 65% of the pre-pandemic average between 2017 and 2019.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
