CJ CGV, the cinema operation unit of South Korean conglomerate CJ Group, will offload a 25 per cent stake in its Vietnam-based real estate affiliate CJ Vietnam Company Limited for 32.4 billion won ($27 million).
The planned stake sale is aimed at improving CJ CGV’s financial health, the company said in a regulatory filing. The transaction is slated for completion on July 3.
CJ Vietnam Co is a real estate unit of the Korean chaebol and develops office buildings in Vietnam.
Originally a subsidiary of Vietnamese logistics major Gemadept, CJ Vietnam Co was acquired by CJ Group and its subsidiaries in 2013. Later in 2017, CJ Group acquired a majority stake in two of Gemadept’s business units.
Korean media reported that CJ CGV came up with the Vietnam asset disposal as a consequence of the aftermath of the COVID-19 pandemic. Its debt-to-equity ratio was said to surge by nearly 200 percentage points to 845 per cent in Q1 2020.
The company’s sale revenue declined by half compared to a year ago, and net loss increased from 85.7 billion won to 118.6 billion won, according to local newswire BusinessKorea. Losses in overseas businesses such as Vietnam and Turkey were also expanding, it added.
After a three-month lockdown in Vietnam, cinemas were only allowed to reopen a month ago.
CJ CGV entered Vietnam’s theatre business in 2011 when it acquired a controlling stake in local operator Megastar. In 2018, the Korean company dropped a plan to list its Vietnam unit on the main Kospi market, saying it was “difficult to accurately access the value of the transaction.”
The proposed IPO had been estimated to raise up to 132 billion won for CJ CGV Vietnam to finance its expansion plan.
Meanwhile, private equity firm MBK Partners and investment bank Mirae Asset Daewoo late last year agreed to acquire a 28.57 per cent stake in CJ CGV for $286 million.
CGI Holdings, a special purpose company of the cinema chain, will sell 653,364 new convertible preference shares to the consortium. The stake sale will trim CJ CGV’s ownership in CGI Holdings to 71.43 per cent.