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CGV makes Mega play in Vietnam
By Patrick Frater
Fri, 08 July 2011, 18:36 PM (HKT)
South Korea's CJ-CGV is to pay $73.6 million to become the largest cinema operator in Vietnam.
The company is buying a controlling 92% stake in Virgin Islands-registered Envoy Media Partners, which in turn owns 80% of MegaStar Media Company (Mega Star), Vietnam's leading exhibition circuit. Other shares are owned by local Vietnamese publisher Phương Nam Film | Phương nam phim.
Mega Star, which opened its first cinema in Hanoi in 2006, currently operates 7 multiplexes and 54 screens in Hanoi, Ho Chi Minh City, Danang, Hai Phong, and Dong Nai. Accounting for some 60% of the box office in Vietnam, Mega Star had revenues of $23 million last year and assets of $38 million.
The move is a continuation of CJ-CGV's overseas expansion, which has already seen it open a small multiplex in Koreatown Los Angeles, and five multiplexes in mainland China. Previous expansion by CJ-CGV was through organic growth.
CJ-CGV had previously announced plans to expand into Vietnam and India and opened a representative office in Vietnamese capital Ho Chi Minh City under the management of RYU Seong-soo 류성수 in February this year.
Mega Star is also the leading distributor in Vietnam, operating as local operator for four of the Hollywood majors.
Andrew KIM 김대균, 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. (The group has production interests in the TV sector, through CJ Media.)
The acquisition means that the majority of Vietnamese cinemas will soon be under Korean ownership. In 2008 Lotte Entertainment 롯데엔터테인먼트, Korea's number two exhibition player behind CJ-CGV, bought Diamond Cinema Joint Venture Co (DMC), a Korea-owned circuit operating six multiplexes in Ho Chi Minh and Danang.
The Vietnamese film industry came close to disappearance in the 1980s-1990s with consumers turning to pirated discs and losing the film-going habit. Box office is currently estimated to be growing at some 20% per year, though there are only some 150 viable cinema screens in the country. Local figures suggest that the theatrical 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.
Leading local player, the privately-owned Thien Ngan Film (Galaxy Studio) is now involved in a full spectrum of movie-related businesses; film distribution, production and home entertainment. It operates two multiplexes in Ho Chi Minh.
Mega Star was last year probed by Vietnam's Competition Administration Department in a case focusing on its distribution operations. Four local companies including Galaxy accused Mega Star 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 continues.