Lawsuit may see encore

illustration photo

>> CGV makes Mega play in Vietnam

South Korean entertainment firm CJ-CGV will take over MegaStar which has been entangled in a lawsuit with six local cinema operators.

According to the Film Business Asia website, CJ-CGV Company is to pay $73.6 million for a controlling 92 per cent of stake in Virgin Islands-registered Envoy Media Partners, which owns 80 per cent of MegaStar Media Company. Other shares are owned by Vietnamese publisher Phuong Nam Corporation.

The acquisition means that the majority of Vietnamese cinemas will soon be in Korean hands.

A member of MegaStar’s communications team told VIR that Envoy, not MegaStar, had decided to sell its stake to CJ-CGV.

“We don’t know the reasons behind the acquisition. Acquisition procedures have almost been completed and official information about the acquisition will be announced within a month,” she said.

But Film Business Asia said the move was a continuation of CJ-CGV’s overseas expansion, which had already seen it open a small multiplex in Koreatown Los Angeles, and five multiplexes in mainland China.

CJ-CGV’s strategic planning officer Andrew Kim said CJ-CGV expected to complete the transaction within the next 6-8 weeks and did not anticipate regulatory problems as the deal was the first by the CJ conglomerate in Vietnam’s film industry.

In February, 2011 CJ-CGV announced plans to boost operations in Vietnam and opened a representative office in Ho Chi Minh City.

“We think that the acquisition will not affect MegaStar’s business performance,” the communication representative said.

Phuong Nam chairwoman Phan Thi Le said Phuong Nam was ready to cooperate with CJ-CGV. The acquisition would not affect Phuong Nam’s stake in MegaStar and would offer a good chance for MegaStar to further develop as CJ-CGV was a strong company.

However, the acquisition by CJ-CGV of Envoy Media Partners is unlikely to get MegaStar off the hook over allegations that the company abused its dominant position in the market.

In May, 2010 the Vietnamese Ministry of Industry and Trade’s Competition Administration Department (CAD) investigated MegaStar as part of a case focusing on the firm’s distribution operations.

Six local companies, including Cinebox, Media 212 Company, Saigon Movies Media Company, Galaxy Studio Company, Hanoi Cinema Company and Dong Nai Cinema and Movies Distribution Centre, accused MegaStar of imposing unreasonable minimum ticket prices. Investigations are ongoing.

A Ho Chi Minh City Bar Association lawyer representing the six local cinema operators told VIR said he believed the acquisition would not have a huge impact on the lawsuit.

“We don’t know how the lawsuit will develop because no information about the lawsuit has been heard from the CAD since May last year,” he said.

“Thus if the CAD draws out the lawsuit for too long, local enterprises’ confidence in local management bodies will fall away,” he said.

MegaStar opened its first cinema in Hanoi in 2006 and currently operates seven multiplexes in big cities in Vietnam. The company is planning to open another two multiplexes in Hanoi and Ho Chi Minh City in the near future. With a 60 per cent box office share in Vietnam, MegaStar had revenues of $23 million last year.