The public competitive bidding for the sale of management rights of Watcha, Korea's first-generation content streaming service, has failed. A leading acquisition candidate that participated in the preliminary bidding withdrew from the main bidding, throwing the sale process into uncertainty.
According to the investment banking (IB) industry on Tuesday, the main bidding for Watcha's sale, which closed on April 22, failed to attract qualified bidders. CJ ENM and Kinolights, which had participated in the preliminary bidding, did not take part in the main bidding. The two companies are reported to have factored in Watcha's weakening growth momentum since entering corporate rehabilitation, as well as its remaining debts. In M&A deals involving companies under rehabilitation, a bidding is deemed failed when there are no participants in the main bidding, or when the participants' offers cannot be considered valid acquisition proposals.
Following the failed main bidding, the sellers may consider adjusting the acquisition terms and reopening the bidding, conducting a limited competitive bidding by narrowing down qualified candidates, or adopting a stalking horse process in which a preferred bidder is selected before opening up to competitive bidding. However, Watcha's deadline to submit a rehabilitation plan to the Seoul Bankruptcy Court is May 20, raising the possibility that the rehabilitation process itself could be disrupted due to delays in securing an investor.
Founded in 2011, Watcha led Korea's content streaming market before Netflix entered the country. After a prolonged, bruising competition with major domestic and international OTT platforms, its corporate value, which once exceeded 300 billion won ($220 million), has fallen to around 10 billion won ($7.3 million). Following an application by some convertible bond (CB) investors last July, the company entered court-led rehabilitation proceedings and has since pursued a sale through public bidding.
