The native online video platforms (OTT) 'Tving' and 'Wave' are accelerating their merger.
The largest shareholders of each company, CJ ENM and SK Square, are working to enhance merger competitiveness by participating in the second convertible bond (CB) acquisition of Wave. They are also outlining the merger through executive dispatch.
According to the OTT industry on the 16th, Wave is pushing for a merger with Tving. The merger between Tving and Wave came to fruition when CJ ENM and SK Square signed a memorandum of understanding (MOU) for the merger of Wave in December 2023.
SK Square is the largest shareholder of Wave, holding 40.52% equity. Next are the three major terrestrial broadcasters, KBS, MBC, and SBS, with 19.8%.
Tving's largest shareholder is CJ ENM, which holds 48.9% equity. Following that, KT (KT Studio Genie) holds 13.5%, Zen Partners and Company holds 13.5%, SLL Central holds 12.7%, and Naver holds 10.7%.
The merger, initially targeted for completion by the end of 2024, has been delayed due to the inability to secure consent from all shareholders. Major shareholder approval is essential for corporate mergers, and KT, Tving's second-largest shareholder, has maintained its opposition, stating that it 'does not align with shareholder value.' As the merger itself has yet to be confirmed, the method and ratio of the merger have not been determined.
As the delay in the merger worsens Wave's competitiveness, both parties have sought to inject funds through CBs. On the 8th, SK Square additionally acquired Wave CBs worth 75 billion won. Of this, 50 billion won was acquired by CJ ENM, resulting in SK Square acquiring 25 billion won and CJ ENM acquiring 50 billion won worth of Wave CBs.
The decline in Wave's competitiveness is due to intensified competition for content in the OTT market and increased investment expenses. Wave has recorded losses for six consecutive years since 2019, with cumulative losses reaching 316 billion won. Recently, the homegrown OTT company Watcha has also entered corporate rehabilitation proceedings.
In November 2024, as the maturity of the 200 billion won CB issued by Wave to SKS PE and Mirae Asset Venture PE approaches, SK Square is expected to acquire 150 billion won, and CJ ENM is expected to acquire 100 billion won of CB for repayment.
An industry insider noted, 'Wave has postponed the timeline for new investments or strategies until after the merger, and as the merger is prolonged, it is facing difficulties.' He added that this investment is a measure to prevent the weakening of competitiveness until the merger.
When the two platforms merge in the future, the purpose is also to strengthen control over Wave. CBs can be converted into shares at maturity, allowing for financial support now and securing equity in the growing company in the future.
Post-merger governance is expected to be restructured around CJ ENM. An insider in the OTT industry explained that 'this CB investment is being carried out as agreed upon since CJ ENM and SK Square's CB investment in November 2024,' adding that 'the process of changing many Wave executives to CJ ENM personnel is essentially a process of transferring governance to CJ ENM.'
The industry expects the integration of Tving and Wave to expand global market access for K-content and increase added value. The merger is expected to strengthen economies of scale and bargaining power, allowing challenges to the overseas distribution market, currently virtually monopolized by Netflix.