SINGAPORE — Media company mm2 Asia, which owns eight cinemas under the Cathay brand, announced on Wednesday (Dec 9) it has entered into a Heads of Agreement for the possible merger of its cinema business with Golden Village cinemas in Singapore, which is owned by Orange Sky Golden Harvest Entertainment.

The merger would make the combined business the largest cinema operator in Singapore.

mm2 Asia, a Singapore-listed company, also operates 14 cinemas in Malaysia under Cathay Cineplexes Malaysia, Mega Cinemas and Lotus Fivestar brands. 

Orange Sky Golden Harvest owns 14 Golden Village cinemas in Singapore and is listed on the Hong Kong Stock Exchange.

It would also provide "advantageous economies of scale" and more financial and operating stability to the mm2 cinema business, given the challenges faced by cinema operators since the start of Covid-19 outbreak, the company said in a filing with the Singapore Exchange.

There has also been "general disruption to the movie and cinema business, with the advent of content streaming apps and the growth of video content on social media", mm2 Asia said.

"The merger would result in a stronger platform for the operation of the cinema business," it added.

Under the deal, both sides are hoping to bring in one or more new investors to inject capital into the merged business, which would also provide "additional working capital for the combined business to meet, among others, its operating costs, and strengthen the balance sheet of the combined business".

DEAL NEEDS APPROVAL

The merger is subject to approval from shareholders from both mm2 Asia and Orange Sky Golden Harvest Entertainment. 

It also requires approval from the Singapore Exchange and Hong Kong Stock Exchange, as well as government authorities such as the Competition and Consumer Commission of Singapore. 

"If the terms of the Definitive Agreements cannot be agreed, or the conditions for the Proposed Transaction satisfied, by 31 Dec, 2021, the Heads of Agreement will terminate and neither party will have any further rights or obligations thereunder," mm2 Asia said.

IPO LISTING

Earlier this month, mm2 Asia also announced plans for a possible spinoff of its cinema business by way of a listing on the Catalist board.

It is currently being proceeded with in parallel with the work on the proposed merger, mm2 Asia said on Wednesday.

If the listing is completed successfully, mm2 and Orange Sky Golden Harvest Entertainment will discuss "in good faith the basis on which the merger and proposed transaction would take place, taking into account the listed spinoff business".

mm2 Asia also said the two sides are discussing the financial terms based on operating figures from financial year 2019, subject to mutually agreed adjustments. CNA

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