CJ ENM is exploring an acquisition of the domestic online video service (OTT) corporations Watcha, which is undergoing rehabilitation proceedings. With CJ ENM jumping into a sale process that was expected to be led by content startups and financial investors (FI, PE), some say Watcha's chances of recovery have grown.
According to the entertainment and legal sectors on the 30th, CJ ENM submitted a letter of intent last week to the lead manager for Watcha's sale. Submitting a letter of intent alone does not confirm an acquisition. Under the lead of the Seoul Bankruptcy Court, procedures will proceed through due diligence on Watcha, a main bid, selection of a preferred bidder, and signing of a final contract.
This rehabilitation process is being conducted as an open competitive bid rather than as a "stalking horse" method that preselects a bidder and seeks other bidders who can offer better terms through competitive bidding. In addition to CJ ENM, other corporations submitted letters of intent, forming a structure with multiple potential acquirers participating from the early stage.
A CJ ENM representative said, "We are watching with interest," declining to comment further.
A legal industry source said, "Multiple corporations submitted letters of intent," adding, "However, they can withdraw after due diligence, and new candidates may emerge depending on the situation, so it is difficult at this stage to conclude who will acquire it."
There was an outlook that the Watcha sale would revolve around startups and financial investors (FI). The video content recommendation platform Kinolights expressed interest in acquiring it, and participation by major content companies was uncertain. Kinolights runs content review and rating services while expanding its film distribution business, leaving room to secure business overlap with Watcha.
However, as Kinolights posted operating losses of about 500 million to 1.9 billion won from 2021 to 2024, talk emerged that a solo acquisition would be difficult and that it would form a consortium with FIs.
With CJ ENM's submission of a letter of intent, analysis is emerging that Watcha's chances of recovery have increased. Observers cite CJ ENM's competitiveness across content production and distribution, as well as its capacity to mobilize capital. It also operates an OTT business through its subsidiary Tving, giving it strong platform operation experience and business understanding.
Initially, CJ ENM had mapped out plans to expand its OTT market share through a merger of Tving with Wavve, which brings together the three terrestrial broadcasters. But as KT, a major shareholder of Tving, did not agree to the Wavve merger and progress stalled, CJ ENM reportedly shifted course to pursue a Watcha acquisition. Bringing Watcha into the fold could help expand its footprint in the market and is seen as advantageous to bolstering its presence in competition with global players.
Watcha's financial and business structure is expected to be a variable during the upcoming due diligence. Given the nature of corporations in rehabilitation, potential acquirers may drop out depending on the size of accumulated losses and the liability structure. Ultimately, not only the purchase price but also financing capacity and future business plans will be considered comprehensively to select a preferred bidder, with finalization subject to court approval.
Founded in 2011, Watcha launched a streaming service in 2016 after starting with a personalized movie recommendation service. It gained popularity through movie ratings and the like, attracting users. But as competition in the OTT market intensified, it lost competitiveness, faced a liquidity crisis, and has been undergoing rehabilitation proceedings since last year.