Singapore Cinema Chains in Merger Talks

Patrick Frater
·3 min read

Negotiations are underway concerning a possible merger of the cinema exhibition operations of Golden Village and mm2. The companies say that the deal talks are spurred by the negative effects of the coronavirus pandemic.

Multi-territory cinemas group Orange Sky Golden Harvest said in a regulatory filing that it had signed a heads-of-agreement with Singapore-listed mm2 Asia, which operates the Cathay Cineplexes circuits in Singapore and Malaysia. Mm2 Asia made a similar filing to the Singapore Stock Exchange.
Golden Village is generally the market leader in Singapore with 13 multiplexes, while Cathay has eight complexes in Singapore and 14 across the border.

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As the deal is at an early stage, its structure and financial terms were not disclosed. Earlier this month, mini-conglomerate mm2 said that it was considering spinning off the Cathay cinemas business into a company with its own listing on a lower tier of the Singapore Stock Exchange.

The Golden Harvest statement said that the exhibition business is facing “challenges” from the COVID-19 outbreak and the advent of streaming apps and video watch via social media. It made no reference to the changing windows practices of the major Hollywood studios which normally account for the vast majority of ticket sales.

The statement did however reveal that the merger would need to be accompanied by a fresh injection of equity capital from a new outside investor. This is necessary to help cover operating costs, and to rebuild the financial strength of the combined business.

The statement is layered with bitter ironies. Golden Harvest and mm2 had previously battled each other for dominance in what was already a static market and is now one that has tumbled.

Golden Harvest for many years had joint ownership of Golden Village in partnership with Australia’s Village Roadshow. However, in 2017, Golden Harvest blocked the sale of Village Roadshow’s 50% stake to would-be buyer mm2. Golden Harvest then bought Village’s shares, making it the outright owner, while mm2 went and paid top dollar to acquire privately-owned Cathay. That put the two groups in head-to-head competition.

Another twist that will not be lost on long-term followers of Golden Harvest, is the assertion in the filing that “the (proposed) merger would allow the company to expand into a new market in Malaysia.”
Golden Harvest was previously operational as an exhibitor in five territories in East Asia, Hong Kong, mainland China, Taiwan, Singapore and Malaysia. Indeed, it was instrumental in the formation of Malaysia’s two top cinema chains (Tanjong Golden Village, later known as TGV) and Golden Screen Cinemas (GSC). But it sold out of both properties between 2006 and 2008, with new management choosing to invest in mainland China instead.

Golden Harvest’s decade-long exhibition sector adventure in China, where it had initially built some of the country’s most successful multiplexes, ended in January 2017 when it sold its by then badly struggling chain to Dadi.

Now, with the proposed merger deal, Golden Harvest is seeking to become leader in the ex-growth Singapore market and to re-enter Malaysia. In Singapore it will require clearance from competition regulators.

The Malaysian exhibition sector grew strongly earlier this decade, but it remains hemmed in by local content quotas and the box office under-performance of locally-made movies. The country’s number three chain MBO filed for bankruptcy in October.

Coronavirus has had a severe impact in on the economies of both countries. Singapore cinemas closed in March and were allowed to re-open in July. But Hollywood titles normally account for some 95% of ticket sales and so the studios’ increasingly depleted release schedule has stymied much of a recovery.

Cinemas in Malaysia were closed for three and a half months between mid-March and the end of July. They closed again at the beginning of November as the country endured another virus surge and some are now set to reopen from Dec. 16, in time for Warner’s “Wonder Woman 1984.”

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