Toho buys 25% stake in CJ ENM’s Fifth Season for $225 mn

Toho Co. has acquired a 25% stake in Fifth Season for $225 million, a move expected to be a win for not only the money-losing US-based producer-distributor and its South Korean parent CJ ENM Co. but also the Japanese studio, which has been seeking to reach a broader global audience.  

CJ ENM announced on Monday that Toho’s US subsidiary Toho International has taken over a 25% stake in Fifth Season via a rights offering, becoming the second-largest shareholder of the US-based independent studio, known for “La La Land” and Apple TV+’s hit series “Severance”.

Following the deal, CJ ENM’s stake in Fifth Season fell to 60% from 80%, and the Japanese studio will partner with the Korean entertainment giant to broaden not only its own content but also the US studio’s content.

Endeavor Group Holdings, the stake of which has dropped to 15% from 20%, will remain as a strategic shareholder.

“This is a winning deal for all three --- the Korean, Japanese and US content producers,” said Cho Min-ha, an analyst at Samsung Securities Co., anticipating an improvement in Fifth Seasons’ profitability next year thanks to the proceeds from the sale of its new shares to Toho, which will also enable it to normalize its content production.

The Korean brokerage house revised up its CJ ENM stock target to 88,000 won ($66.90) apiece after the deal.

CJ ENM shares traded down 4.2% at 75,400 won on Tuesday morning, erasing yesterday’s 4.2% gain.

THREE-WAY WIN

The Korean entertainment giant purchased an 80% stake in the US studio, formerly known as Endeavor Content, in 2021 in a whopping $775 million deal in hopes of accelerating the distribution of Korean TV series and films in Hollywood through the US distributor.

But the COVID-19 pandemic coupled with the Hollywood writers’ strike has delayed the production and distribution of series and films by Fifth Season, causing the US studio massive losses and crippling CJ ENM’s planned grand foray into Hollywood.  

The strategic partnership with Toho, one of Japan’s longest-running entertainment conglomerates behind US box office hit “Godzilla Minus One,” is, however, expected to bolster Fifth Season’s global reach with more diverse content, which will also be a major boon to its Korean parent.

Toho, boasting more than 2 trillion won ($1.5 billion) in annual revenue on average, owns a wide array of intellectual property in films, TV series, animation series and plays, including “Spirited Away” and “Suzume.”

“With their collaboration, alongside that of the great partnerships with CJ ENM and Endeavor, Fifth Season is positioned better than ever to delight audiences around the world with an expansive slate of top-quality content,” said Fifth Season Co-CEOs Graham Taylor and Chris Rice in a joint statement after the announcement of the deal on Monday.

Koo Chang-gun, CEO of CJ ENM, added, “We are thrilled to have Toho, the biggest entertainment company in Japan, as our partner at this time when Fifth Season is making significant strides as a global major studio.”

The deal is expected to allow CJ ENM to reach out to broader audiences in Japan with Toho’s extensive IPs, while the Japanese studio is likely to accelerate its global push with fresh ideas and views from the Korean partner.

“Crossing the ‘bridge’ between Japan and the world that will be built through this collaboration, we hope to see Japanese projects, intellectual property, and content expand further into the global market,” Toho President Hiro Matsuoka said in a statement after the deal.

CJ ENM, behind the global hit Netflix series “Squid Game” and Oscar-winning “Parasite”, plans to remake Toho’s existing content for a bigger global audience or create new content.

Especially, it is a good time to reproduce Toho’s animated content into live-action movies, a wave spreading across the global film industry, a CJ ENM official said.

Write to Sun A Lee and Si-Ook Ahn at suna@hankyung.com

Sookyung Seo edited this article.