CJ ENM is exploring the acquisition of Watcha, a domestic online video service (OTT) corporations that is undergoing rehabilitation proceedings. With CJ ENM jumping into the takeover race that had been expected to center on content startups and financial investors (FI, PE), assessments say Watcha's chances of recovery have grown.
On the 30th, according to the entertainment and legal sectors, CJ ENM submitted a letter of intent to the lead manager for Watcha's sale last week. Submitting a letter of intent alone does not finalize an acquisition. Under the lead of the Seoul Bankruptcy Court, procedures will proceed through due diligence on Watcha, the main bid, selection of the preferred bidder, and the signing of the final contract.
This rehabilitation process proceeded as an open competitive bid, not a "stalking-horse" method that designates an acquirer in advance and seeks another acquirer who will offer better terms through competitive bidding. In addition to CJ ENM, other corporations submitted letters of intent, forming a structure from the initial stage with multiple potential acquirers participating.
A CJ ENM representative said, "We are watching with interest," and declined to elaborate.
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 make the acquisition."
There had been projections that the Watcha takeover race would revolve around startups and financial investors (FI). KinoLights, a video content recommendation platform, expressed interest in acquiring the company, while participation by major content companies was uncertain. As KinoLights operates a content review and rating service while expanding its film distribution business, there is 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 prospects for recovery have improved. Observers cite CJ ENM's competitiveness across content production and distribution and its fundraising capacity. As it runs an OTT business through its subsidiary Tving, it also has strong platform operation experience and understanding of the business.
Initially, CJ ENM had planned to expand its OTT market share through a merger between Tving and Wavve, which includes the three terrestrial broadcasters. However, as KT, a major shareholder of Tving, did not agree to the Wavve merger and progress stalled, the company reportedly shifted direction to acquiring Watcha. If it brings Watcha under its wing, it could help expand its position in the market, and it is said to have judged that it would be advantageous for raising its profile in competition with global players.
During due diligence, Watcha's financial and business structures are expected to act as variables. Given the characteristics of corporations in rehabilitation, acquirers may drop out depending on the scale of accumulated losses and the liability structure. Ultimately, not only the acquisition price but also fundraising capacity and future business plans will be considered comprehensively to select the preferred bidder, which will be finalized upon court approval.
Founded in 2011, Watcha began with a personalized movie recommendation service and launched its streaming service in 2016. It gained popularity through movie ratings and drew users. However, as competition in the OTT market intensified, it lost competitiveness and even faced a liquidity crisis, and it has been undergoing rehabilitation proceedings since last year.