SINGAPORE – Singapore-listed mm2 Asia announced on Wednesday (July 28) that it has received an offer for its Cathay cinema business from local financial investment firm Kingsmead Properties.
mm2 Asia operates eight Cathay cinemas in Singapore and 13 cinemas in Malaysia, as well as a movie film distribution business.
It entered into a non-exclusive binding term sheet with Kingsmead Properties for the proposed sale of at least 80 per cent of the cinema business.
Kingsmead Properties is incorporated in Singapore and is in the business of making strategic investments. Ms Jasmine Foo Mei Ling, a Singaporean citizen, is the sole shareholder and director of the company. Ms Foo manages her family business interests and previously worked in several global financial institutions.
The acquisition price for the proposed transaction is based on a valuation of between $80 million and $120 million for the entire cinema business under mm Connect, a wholly owned subsidiary of mm2 Asia. Kingsmead will pay a $6 million deposit for the acquisition.
The consideration was arrived at on a willing-buyer and willing-seller basis, and takes into account current market conditions, including the impact of Covid-19 restrictions on cinemas, said mm2 Asia.
The Catalist-listed entertainment company said discussions are still at the term sheet stage, during which key commercial terms for the translation are set out. A sale will be subject to several conditions, including Kingsmead Properties securing financing for the acquisition and mm2 Asia obtaining approval from shareholders and regulators.
mm2 Asia also said other earlier options, including the possible merger and independent spin-off initial public offering (IPO) of its company’s cinema business are still ongoing. mm2 Asia had announced last December a tentative bid to merge its cinema business with Golden Village cinemas in Singapore, which is owned by Orange Sky Golden Harvest Entertainment.
In the event that the sale to Kingsmead Properties is not completed, the $6 million deposit will be converted to either mm2 Asia shares at eight cents, or IPO shares of mm Connect, which holds the cinema business. mm Connect had obtained approval in principle from the Singapore Exchange to list on Catalist prior to the proposed sale.
The move comes at a difficult time for the cinema business due to the Covid-19 outbreak and will provide mm2 Asia with more financial stability, said the company. It will also allow it to pay debt and focus on its core business of movie production and content creation, which continues to grow amid a spike in video-streaming demand, mm2 Asia added.
Based on the consideration of approximately $120 million, mm2Asia expects to receive net proceeds of about $119.5 million from the proposed transaction.
Founder and executive chairman Melvin Ang said the cinema business has been the company’s “most asset-heavy member” and that it had been “looking for ways to optimise its stake in the cinema business”.
mm2 Asia incurred a net loss of $99 million for the financial year ended March 31, compared with a net profit of $6.3 million the year before. As at end-March, the company’s liabilities exceeded its assets by $119.5 million. These conditions prompted its auditor on July 13 to indicate that “a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern”.
mm2 Asia shares rose 0.4 cent, or 6 per cent, to 7.1 cents as of 9.30am on Wednesday, after the announcement.