Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Tving, Wavve merger talks yet to result in deal
Tving CEO Choi Ju-hui attends a meeting between CEOs of four domestic streaming platforms at Korea Communications Commission in Gwacheon, Gyeonggi Province, May 28. Yonhap
By Nam Hyun-woo
Talks over merging Korea's two major streaming service providers, Tving and Wavve, remain adrift, with efforts to reconcile the differing interests of each stakeholder dragging on for seven months.
Major shareholders of the two businesses are expressing their steadfast commitment to the merger, but industry officials estimate it will take several more months to see an actual deal containing details such as the merger ratio.
SLL, a drama production and a major shareholder of Tving, released a statement Friday that the company is "taking a positive stance over the talks," denying reports that the merger may fail due to SLL's "excessive demands for higher returns for content it provides compared to other content providers."
The shareholders of Tving and Wavve began talks for the merger in December last year to create the largest video streaming platform in Korea and challenge Netflix's control of the domestic market.
Wavve CEO Lee Tae-hyun attends a meeting between CEOs of four domestic video streaming platforms at Korea Communications Commission in Gwacheon, Gyeonggi Province, May 28. Yonhap
Initially, contentious issues were the merger ratio and 200 billion won ($145.2 million) of convertible bonds (CBs) issued by Wavve's largest shareholder, SK Square. SK Square raised approximately 200 billion won in November 2019 by issuing the CBs with a 5-year maturity, under the condition of a successful initial public offering within that period.
However, disputes over these issues were reportedly resolved in April. According to industry officials, the shareholders temporarily agreed to exchange 1 Wavve share for 1.6 Tving shares, aiming to value the merged firm at 2 trillion won. They also decided that the merged firm would cover a certain portion of the CBs issued by SK Square.
Despite the agreements, the shareholders are yet to reach an official agreement, and rumors casting a skeptical outlook on the merger are persistent over the deal.
Market watchers attribute the protracted negotiations to the complex shareholding structure of the two companies.
Tving's largest shareholder is CJ ENM, with 49 percent, followed by KT Studio Genie, with 13.5 percent, Jan Partners & Company, with 13.5 percent, SLL, with 12.8 percent and Naver, with 10.7 percent.
SK Square is Wavve's largest shareholder, with 40.5 percent, and Korea's three major broadcasters — KBS, MBC and SBS — each hold 19.8 percent.
Since none of those shareholders hold a majority stake in one company, the negotiation process has to be about drawing out a deal that serves each shareholder's interests, while a coercive push by a number of shareholders may invite opposing shareholders to exercise dissenters' rights.
Logos of Tving and Wavve
The drawn out talks have also been attributed to the financial difficulties troubling the largest shareholder.
According to the country's Monopoly Regulation and Fair Trade Act, a holding company has to own 40 percent or more stake in its subsidiary or sub-subsidiary.
Since CJ ENM is controlled by CJ Group's holding company, CJ Corp., it has to hold more than 40 percent of stake in the merged firm, and the current merger ratio will result in CJ ENM to hold slightly above 30 percent in the merged firm. This means CJ ENM has to spend more money to keep the merged firm within the group's control.
However, CJ ENM posted 14.6 billion won in operating loss last year, and Tving has also accumulated operating losses for years, including 142 billion won in operating losses last year.
Despite negative outlooks, industry officials believe the two streaming services will eventually merge, with a tangible deal possibly coming before November. Wavve's content contracts with the three major broadcasters are set to expire between September and October. If negotiations drag on beyond this period, Wavve may lose its bargaining power in the merger talks, thus encouraging stakeholders to engage in talks more actively.