SGX questions Spackman group on planned sale of Zip Cinema business for $ 20.5 million
SINGAPORE (THE BUSINESS TIMES) – The Singapore Stock Exchange (SGX) sent a list of questions to Spackman Entertainment Group regarding the company’s plan to sell its entire Zip Cinema business for around 18 billion won (20.5 billion million Singaporean dollars).
Among other things, SGX asked the company on Friday evening (September 17) about its review and the rationale for the proposed sale, and whether it was in the best interests of the company and its shareholders.
SGX noted that Spackman’s FY2020 annual report released on April 15 indicated that Zip Cinema had “notable critical and box office success,” in that its films had good ticket sales and that the company had achieved commercial success even amid the ongoing Covid-19 pandemics.
Film production had also made up half of the group’s revenue for fiscal 2020, SGX said.
Spackman argued that the proposed divestiture offers the company the opportunity to expand its production of content for over-the-top (OTT) platforms, which have gained popularity in the film and theater industry, with consumers becoming increasingly accustomed to online viewing and social distancing. .
OTT platforms are multimedia services offered directly to viewers via the Internet.
The consideration for the transaction is also greater than the group’s current market cap of $ 7.6 million, Spackman said. The divestiture will provide the company with funds to diversify into the US Hollywood film business, which is potentially more profitable than South Korean films because Western films have a larger international audience, the company said.
The company previously stated that it is expected to realize a gain on disposal of US $ 8.9 million (S $ 12 million) and excess of net proceeds over book value of approximately US $ 8.3 million of cession.
SGX asked about Spackman’s experience in the US film market and the role the company would have in US Hollywood projects.
Spackman responded that the production of American films is similar in its business model, except that it is more flexible in terms of structure, which will allow the company to take advantage of its ability to produce quality films on a competitive budget. .
The company added that it would ensure the opportunity to participate in American Hollywood films through the development, co-production and funding of these projects. He also said the gain from the proposed divestiture would put him in an improved financial position and provide him with the liquidity to focus more on his OTT business and the US Hollywood film business.
SGX asked if the company intends to continue producing films. At this, Spackman said he would continue to produce films and dramas through its subsidiaries Studio Take, Simplex Films and Greenlight.
SGX asked about how Kakao Entertainment Corp, a subsidiary of South Korean listed internet company Kakao Corp and the buyer of Zip Cinema, was introduced to the company.
The company said Kakao Entertainment approached Zip Korea directly about the negotiations, as Zip Korea expanded its content production business.
SGX also asked Spackman about guarantees of the approximately 18 billion won net proceeds that it will pocket from the divestiture. The group said it has a cash management policy in place for the net proceeds and will disclose the material use and reallocation of the uses of the proceeds where appropriate.
In the same announcement, SGX noted that Spackman has entered into a Sale and Purchase Agreement (SPA) with a potential buyer of an office building owned by Zip Korea in Paju-si, South Korea; the exchange also lobbied for information about the SPA counterpart.
Spackman simply stated that the potential buyer is a publishing company that is unrelated to the company and its board of directors. He said the expected property transfer is expected to be completed between mid-November and the end of the year.
Spackman stock closed unchanged on Friday at 0.5 cents.