SINGAPORE - Singapore-listed mm2 Asia has received an offer for its Cathay cinema business from local financial investment firm Kingsmead Properties.
mm2 Asia operates eight cinemas in Singapore and 13 in Malaysia, as well as a movie film distribution business.
It entered into a non-exclusive binding term sheet with Kingsmead Properties for the proposed sale of at least 80 per cent of the cinema business, it announced on Wednesday (July 28).
Singaporean Jasmine Foo Mei Ling is the sole shareholder and director of Kingsmead Properties.
mm2 Asia shares closed up 3 per cent at 6.9 cents on Wednesday.
The proposed acquisition price is based on a valuation of between $80 million and $120 million for the entire cinema business. Kingsmead will pay a $6 million deposit. mm2 Asia acquired the cinema chain in 2017 for $230 million.
The consideration takes into account current market conditions, including the impact of Covid-19 restrictions on cinemas, said mm2 Asia.
The Catalist-listed entertainment company said a sale will be subject to several conditions, including Kingsmead Properties securing financing and mm2 Asia obtaining approval from shareholders and regulators.
mm2 Asia added that other options, including a merger or an initial public offering of the cinema business, are still ongoing.
Last December, mm2 Asia announced a tentative bid to merge its cinema business with Golden Village in Singapore, which is owned by Orange Sky Golden Harvest Entertainment.
A sale will provide mm2 Asia with more financial stability, said the company, and allow it to pay down debt and focus on its core business of movie production and content creation, which continues to grow amid a spike in video-streaming demand.
mm2Asia expects to receive net proceeds of about $119.5 million from the proposed transaction based on the consideration of approximately $120 million.
Founder and executive chairman Melvin Ang said the cinema business has been the company's "most asset-heavy member" and that it had been "looking for ways to optimise its stake in the cinema business".
mm2 Asia incurred a net loss of $99 million for the financial year ended March 31, compared with a net profit of $6.3 million the year earlier. Liabilities exceeded assets by $119.5 million as at March 31.
These conditions prompted its auditor to indicate on July 13 that "a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern".
mm2 Asia raised nearly $54.7 million in a rights issue in April to reduce its liabilities.