Entertainment company mm2 Asia announced on Thursday (Nov 2) it has entered into an option agreement to acquire all of Cathay Cineplexes’ Singapore cinema operations, with the acquisition targeted to close on Nov 24.
The move will see mm2 acquire Cathay Cineplexes’ eight cinemas across Singapore, comprising 64 screens, or 11,569 seats. The mainboard-listed company said it will retain employees of Cathay Cineplexes.
The deal to buy Cathay Cineplexes comes after Hong Kong’s Orange Sky Golden Harvest Entertainment (Holdings) blocked mm2’s bid to take a 50 per cent stake in Singapore’s Golden Village cinema business, in a deal valued at S$184 million.
The acquisition, mm2 Asia said in a pre-market filing, is a “strategic investment by the group in line with the group’s overarching strategy to diversify into the downstream value chain of film production”, and will be funded entirely through internal funds and borrowings.
It will pay S$230 million in cash for the acquisition comprising of a S$15 million deposit, with the remaining S$215 million to be paid six months after the deal’s closure.
Cathay has issued and paid-up share capital of S$5 million comprising five million ordinary shares, 48.85 per cent of which are owned by Equus Holdings, and 51.15 per cent owned by Choo Meileen, Cathay’s managing director and the granddaughter and niece of Cathay Organisation’s founders.
The consideration takes into account Cathay’s adjusted earnings before interest depreciation and amortisation (Ebitda) of S$16.66 million for the financial year ended Dec 31, 2016, and estimated future revenue of S$21 million from Cathay’s new seven-screen Parkway Parade complex, which began operations in September this year.
The intrinsic value for the Cathay Cineplexes brand was also taken into account, estimated to be between S$24 million and S$30 million.
In the announcement, mm2 said that the group’s cinema business acquisitions were undertaken to add an additional source of recurring income and growth, and in July this year, it received shareholder approval to diversify into the cinema management and operations business. Aside from the impending deal, the group has also completed the acquisition of cinema-related businesses in Malaysia and Hong Kong.
Executive chairman of mm2 Asia Melvin Ang said that the Cathay name was very much a part of Singapore’s history, and that he wants to “zealously protect” the Cathay Cinemas’ legacy, and realise Ms Choo’s vision for Cathay Cinemas to be “one of the major film exhibitors in the Asian market”.
Ms Choo said that Cathay cinemas has met and weathered many challenges and survived, but the entertainment environment had changed and the company needed to extend its reach broadly.
“Melvin and his team at mm2 respect the legacy of Cathay cinemas and with their vision to become one of the top entertainment companies in Asia, I think our child is in good hands,” she said.
Original article found at The Business Times