mm2 Asia, on July 27, entered into a non-exclusive binding term sheet with Kingsmead Properties, where the latter has offered to buy over 80% of the issued and paid-up share capital in mm Connect.
mm Connect is a wholly-owned subsidiary of mm2 Asia, which owns the group’s cinema business. It operates eight cinemas in Singapore and 13 cinemas in Malaysia, as well as a movie film distribution business.
Kingsmead Properties is a Singapore-incorporated company, where it is in the business of making strategic investments. Jasmine Foo Mei Ling is the sole shareholder and director of the company. Foo manages her family business’ interests and has previously worked in several global financial institutions.
The proposed transaction has valued mm Connect between $80 million and $120 million on a debt and liability free basis.
The consideration was based on several factors, including the current market conditions, the net tangible assets (NTA) value of the sale shares as at March 31, the prospects of the cinema business, as well as the proposed transaction’s rationale and benefit to the company.
At this stage, mm2 Asia has only entered into the term sheet, which is still subject to the negotiation and finalisation of the sale and purchase agreement (SPA) to be agreed and entered into between both parties.
The transaction is also subject to several conditions including seeking the approval of mm2 Asia’s shareholders in an extraordinary general meeting (EGM).
Upon signing the term sheet, Kingsmead Properties will pay mm2 Asia a total deposit of $6.0 million in two tranches. The first tranche of $3.0 million will be paid on the seventh business day after the execution of the term sheet, while the second tranche of another $3.0 million will be paid on the seventh business day after the SPA has signed.
The deposit may be repaid in full or exchanged into newly issued shares of mm2 Asia at a premium of 8.0 cents per new share (relative to Tuesday’s share price of 6.7 cents each) should the transaction fall through.
According to mm2 Asia, the proposed transaction is believed to bring more financial stability to the group as a whole, by allowing it to de-leverage itself, which would strengthen its balance sheet.
The sale would also allow the group to focus on its core business of movie production and content creation, which continues to grow at a “decent pace” amid Covid-19 pandemic lockdowns.
“The cinema business has always been a strategic part of the group’s content creation and distribution businesses. However, as the group’s most asset-heavy member, the cinema business has been particularly challenging since the outbreak of Covid-19,” says Melvin Ang, mm2 Asia’s founder and executive chairman.
“With this, mm2 has been looking for ways to optimize its stake in the cinema business whilst retaining its strategic advantage. We are happy that Kingsmead looks upon the business with a long-term investment perspective, with the resources to help grow and transform the cinema business,” he adds.
The final offer and price will be announced ahead of the EGM.
Shares in mm2 Asia closed 0.2 cent higher or 3.1% up at 6.7 cents on July 27.
