K-content makers to list on Nasdaq via $610 mn SPAC deal

Seven South Korean content makers are set to list on the Nasdaq through a $610 million merger deal with a special purpose acquisition company (SPAC) as they aim to lure US investors in a bid to expand their presence in the global entertainment industry.

K Enter Holdings Inc., a Delaware, US-based company that has contracts to acquire seven Korean entertainment companies, on Thursday agreed to merge with Global Star Acquisition Inc., a Nasdaq-listed SPAC.

“Following the closing of the merger agreement, the parent of the combined company will be named ‘K Wave Media Ltd.’ and we expect that its securities will be listed on the Nasdaq Stock Market,” said K Enter and Global Star in a statement.

The transaction is expected to wrap up late in the fourth quarter, according to the statement. Banking sources in Seoul said they aimed to start trading the stocks of the combined entity in December.

Lee & Ko LLP and Loeb & Loeb LLP were legal advisors to K Enter in Korea and the US, respectively. PwC and KPMG Samjong Accounting Corp. served as the auditor and the financial adviser, respectively.

MORE MONEY FOR BETTER BARGAINING POWER THROUGH IP

K Enter aims to boost its capital and bargaining power against global over-the-top (OTT) media platforms such as Netflix Inc. through the Nasdaq listing, which has an advantage over an IPO in Korea in that it's easy to raise more money from global investors.

The move is expected to revaluate domestic content producers once major overseas investors inject money into high-quality content made by local companies.

The company is set to secure the initiative in original intellectual property to have better bargaining power in negotiations with major content distributors such as OTT platforms.

“Heads of major production companies agreed that we should not just supply original IP to OTTs with massive capital but take the lead,” said K Enter Chairman Choi Pyeung Ho. “We will have clear synergy, as the company consists of people who have worked together for as long as 20 years.”

Korea's entertainment industry has produced such global box-office hits as Parasite and Squid Game, but the global OTT platforms made much larger profits than the producers.

Local content producers earn 10-20% of total profits in addition to fees for production costs from OTT platforms, according to industry sources.

KOREAN ENTERTAINMENT INDUSTRY’S FIRST NASDAQ LISTING

K Enter is poised to become Korea’s first entertainment firm to go public on the Nasdaq. The holding company was recently founded to acquire seven entertainment companies that made popular drama series and films.

Bidangil Pictures, the producer of Space Sweepers, an outer space sci-fi blockbuster, which topped the Netflix movie charts in 2021, was among them. The Lamp Ltd., which produced A Taxi Driver, a hit film based on a true story during the 1980 pro-democracy demonstrations, and Apeitda Production joined Bidangil.

K Enter plans to develop new business channels to maximize the value of their original IP by integrating their production expertise. The seven companies acquired by the company included First Virtual Lab Co., which produces virtual human-themed content, and an IP merchandising firm.

K Enter and the seven companies predict that Korean original IP will expand into the global market given that many domestic film and drama producers have already decided to distribute their works through global OTT platforms such as Netflix and Disney Plus.

K Enter has been working on three programs with plans for global releases in the second half of 2024 under deals inked earlier this year with leading global OTT platforms.

CONTENT-SPECIALIZED PRIVATE EQUITY FIRM

Choi and K Enter CEO Lee Young Jae were chief executive and vice president of Solaire Partners Ltd., respectively, which K Enter is poised to acquire. Solaire is a Seoul-based private equity firm specializing in Korean content.

Choi, who led the film business of Korean entertainment giant CJ ENM Co., was a founding member of CJ CGV Co., the country's top multiplex cinema chain.

He established Solaire based on his expertise in the movie industry and participated in successful films such as Parasite, Extreme Job and The Roundup as an anchor investor.

Extreme Job, an action comedy, was the highest-grossing and second most-viewed film in Korean movie history, providing a 370% return to Solaire.

Write to Ji-Eun Ha and Jun-Ho Cha at hazzys@hankyung.com
 
Jongwoo Cheon edited this article.