Sale of Cathay cinema business in Singapore falls through on Omicron concerns

Shares of mm2 Asia last closed 0.1 cent or 1.9 per cent lower at 5.1 cents on Dec 31, 2021. PHOTO: ST FILE

SINGAPORE - Singapore-listed mm2 Asia’s deal to sell its Cathay cinema business to local investment firm Kingsmead Properties has fallen through, the company announced on Monday (Jan 3) in a filing on the Singapore Exchange.

This news comes as movie theatres have been hit hard by the Covid-19 pandemic over the last two years, with the latest Omicron variant clouding the outlook, experts said.

Kingsmead has chosen to exchange its deposit of $6 million into 75 million newly issued mm2 shares at a price of eight cents per share.

Shares of Catalist-listed mm2 Asia rose sharply on the news, trading up 0.4 cent, or 7.8 per cent, to 5.5 cents on Monday. Some 5.8 million shares changed hands.

mm2 Asia, which operates cinemas under the Cathay brand, previously announced in August that it had entered into a sale and purchase agreement with Kingsmead Properties to sell its cinema business for $84.8 million.

The proposed sale was supposed to be completed by Dec 31 last year. 

mm2 Asia had bought Cathay Organisation’s eight cinemas across Singapore for $230 million in November 2017.

Kingsmead said on Monday that the uncertainty around the Omicron variant has dampened investing appetite for the moment, although the cinema business in Singapore and worldwide “has shown strong turnaround in recent months”.

“We hope to be able to revisit the acquisition again, and hopefully soon enough, when the Covid situation further eases,” it said. 

Mr Melvin Ang, mm2 Asia’s founder and executive chairman, said the company welcomes Kingsmead as a valuable strategic shareholder.

“The Omicron effect on investing sentiments was sharp and unexpected,” he said. 
“However, mm2 remains optimistic of the recovery of the cinema business as signs are indicating a trend towards recovery.”

He added that the firm will still welcome any new proposals from Kingsmead in the future.

Cathay Cineplexes reported that December has been its best month since the start of the pandemic, with big blockbusters like Spider-Man: No Way Home helping to rake in box office takings.

But experts said the cinema industry here and globally still faces an uphill struggle. 

Singapore Polytechnic school of business senior lecturer Leung Sau Yee said: “With the Omicron variant being known to be more infectious, and the surge of Covid-19 cases around the world, consumers may be more cautious when it comes to going to the cinema, given that they will be within a confined space with many other people for a prolonged duration of time.”

National University of Singapore business professor Lawrence Loh observed that cinema attendance, which held steady over the last decade, nosedived during the pandemic. 

“The Covid-19 has almost decimated the industry and many players are even way below financial break-even points,” he said. 

He added that theatre-style cinemas are also challenged by movie streaming alternatives such as Netflix and Disney+.

OCBC chief economist Selena Ling said these movie streaming channels already began affecting traditional cinema before the pandemic, but Covid-19 accelerated the industry’s decline. 

“There may still be a niche market for cinemas, but with safe management measures continuing, it will still be a challenging path ahead,” she said. 

Mr Azhar Abdul-Salam, senior manager at Nanyang Polytechnic's School of Business Management, said there could be cautious optimism that there might be an improvement in audience numbers. 

"With the vaccination-differentiated safe management measures in place, especially increasing social gatherings to groups of five, cinemas may see a higher attendance as compared with the year before," he said. 

 

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