CJ ENM, considered a leading candidate to acquire Watcha, Korea's first-generation content streaming service, has withdrawn from the bidding. Kinolights, which had participated in the preliminary bidding, also declined to submit a proposal in the final round. Watcha entered court-led rehabilitation proceedings in July last year at the request of some investors and subsequently put itself up for sale.
According to investment banking sources on Wednesday, CJ ENM did not participate in the Watcha M&A public competitive bidding that closed on Tuesday. CJ ENM had formalized its review of the acquisition by submitting a letter of intent (LOI) during the preliminary bidding last month. At the time, the market expected that CJ ENM, with its large-scale business foundation and financial strength, would generate synergies in content production and distribution if it took over Watcha. However, Watcha's growth has slowed since entering corporate rehabilitation, and remaining debt is said to have weighed on the decision. "After reviewing the deal from financial and business perspectives, we ultimately decided not to participate in the acquisition process," a CJ ENM official said.
Kinolights, a content startup that took part in the preliminary bidding, also dropped out of the final round. Kinolights operates a video content recommendation platform and has recently expanded into film intellectual property (IP) distribution. Acquiring Watcha would have allowed the company to own and distribute IP favored by film enthusiasts, but like CJ ENM, Kinolights is understood to have factored in current industry conditions and financial risks.
Founded in 2011, Watcha led Korea's content streaming market before Netflix entered the country. After prolonged cutthroat competition with major domestic and international OTT players, its corporate value, which once exceeded 300 billion won, has fallen to around 10 billion won. After entering court rehabilitation proceedings in July last year at the request of some convertible bond (CB) investors, the company has been pursuing a sale through public bidding.
With key candidates failing to submit bid proposals, the Watcha acquisition process has been thrown into uncertainty. The Seoul Bankruptcy Court had planned to select a preferred bidder this month after closing the public competitive bidding on Tuesday, but the withdrawal of several leading candidates has made the sale itself uncertain.
