이 기사는 2021년 07월 13일 07시52분 thebell에 표출된 기사입니다

South Korea’s leading entertainment company CJ ENM plans to acquire film production company Mmakers in a bid to expand its contents lineup.

CJ ENM announced that it will invest about 5 trillion won ($4.48 billion) in content creation over the next five years to become a leader in the global over-the-top (OTT) platform market.

CJ ENM is set to sign a stock purchase agreement with Mmakers, industry sources said Friday. It is said the two sides have broadly agreed on terms and conditions, including a transaction price. A 51% stake in Mmakers will likely be sold for around 16.8 billion won.

Founded in 2019, Mmakers is a film production company led by four Korean film directors, including Kang Je-kyu, Kim Hyun-seok, Jo Ui-seok, and Lee Byeong-heon. The four filmmakers are registered as internal directors.

CJ ENM is set to secure 100% of Mmakers through a stock swap after the deal closing. A stock swap plan is expected to be included in the agreement.

CJ ENM plans to establish a new entity through a split-off which specializes in content creation. CJ ENM seems to plan to make the next Studio Dragon, which is a drama-making wing of the entertainment company.

CJ ENM intends to swap the stake in the newly established subsidiary through the split-off with the remaining stake in Mmakers, followed by listing the new subsidiary’s shares on the stock market.

The planned stock swap is due partly to restrictions on a holding company. The new entity which will be established through the split off will be a second-tier subsidiary of CJ, the holding company of the group. Under the current fair trade law, the second-tier subsidiary is required to own 100% of its subsidiary.

“It can be seen that CJ ENM has made a blueprint to make the next Studio Dragon when carrying out the latest deal,” said an industry source. “It will not acquire a 100% stake right away to save cost.”

CJ ENM split off its drama production business in 2016 and established Studio Dragon, which has grown rapidly based on sufficient cash assets.

Studio Dragon’s valuation has risen rapidly over recent years as it has successfully attracted a global audience with contents based on South Korean webtoons, including "Sweet Home," a Netflix Original remake in 2020.

CJ ENM plans to produce high-quality movies and dramas and supply them to its OTT service TVING and Netflix in the future. (Reporting by Eun Kim)