A leading South Korean investor has become the largest cinema operator in Vietnam, through buying a majority stake in MegaStar.
A report on Film Business Asia last month revealed that South Korea’s CJ-CGV is paying $73.6 million for a 92 per cent stake in the British Virgin Islands-registered Envoy Media Partners Limited (EMP), which in turn owns 80 per cent of MegaStar Media Ltd., Co. (MegaStar), and will become the largest cinema operator in Vietnam. Mr Brian Hall, Chairman of MegaStar, confirmed that the South Korean investor is in the process of completing procedures to secure foreign ownership of MegaStar through repurchasing EMP’s ownership. He said the transaction would be completed within a month.
The reason why EMP decided to relinquish its stake, even though MegaStar was successful in Vietnam, Mr Hall explained, was that “MegaStar has been looking for a partner with the experience and resources to allow us to grow our business to meet the potential that the market offers us.”
CJ-CGV is the largest cinema company in South Korea and one of the most successful and highly respected cinema operators in all of Asia, Mr Hall told a local newspaper. They have cinemas in South Korea and China that are “world-class” in terms of both design and service level. “We think they are a tremendous partner who will add enormous synergy to our growth plans in Vietnam.”
Mr Andrew Kim, a strategic planning officer, told Film Business Asia that CJ-CGV expects to complete the transaction within the next 6-8 weeks and does not anticipate regulatory problems as the deal is the first by the CJ conglomerate in Vietnam’s film industry.
CJ-CGV had previously announced plans to expand into Vietnam and India and opened a representative office in Ho Chi Minh City in February this year.
The group has production interests in the TV sector, through CJ Media, seeing Vietnam as an early and strong receptor of Korean Wave pop culture, and plans to use the multiplexes as a bridge into Southeast Asia. CJ-CGV belongs to the CJ Group, which is already in Vietnam in the fields of bakery, with the Tous Les Jours brand, logistics, media, and TV shopping via a venture with local pay TV service provider SCTV on the SCJ channel.
The acquisition continues a trend of Vietnamese cinemas coming under South Korean ownership. In 2008, Lotte Shopping/Lotte Entertainment, South Korea’s number two player behind CJ-CGV, bought the Diamond Cinema Joint Venture Co (DMC), a South Korean-owned operation with six multiplexes in Ho Chi Minh City and Da Nang.
The move is a continuation of CJ-CGV’s overseas expansion, which has already seen it open a small multiplex in Koreatown in Los Angeles and five multiplexes on mainland China.
Box office receipts in Vietnam are estimated to grow some 20 per cent per year, although there are only some 150 viable cinema screens in the country. Local figures suggest that the market has grown from an annual $2 million in 2006 to $25 million in 2010, of which an estimated $5 million was attributable to Vietnamese titles.
According to Film Business Asia, the privately-owned Galaxy Studio Joint Stock Company is the leading local player in Vietnam. It is now involved in the full spectrum of movie-related businesses: film distribution, production and home entertainment. It operates two multiplexes in Ho Chi Minh City.
Vietnam’s film industry came close to disappearing in the 1980s and 1990s, with consumers turning to pirated discs and losing the movie-going habit. Vietnamese audiences have had access to blockbusters from Hollywood since MegaStar came to the country.
And now it is the leading distributor in Vietnam, operating as a local operator for four of the Hollywood majors. Opening its first cinema in Hanoi in 2006, it now has seven multiplexes and 54 screens in Hanoi, Ho Chi Minh City, Da Nang, Hai Phong, and Dong Nai. Accounting for some 60 per cent of Vietnam’s box office receipts, turnover last year stood at $23 million.
It was probed by Vietnam’s Competition Administration Department in a case focusing on its distribution operations last year. Four local companies, including Galaxy, accused MegaStar of abusing its dominant position to impose minimum ticket prices, beyond what the market could take. Some also accused it of block booking. The investigation is still underway.