The Singapore entertainment company mm2 Asia has entered into an agreement with local investment firm Kingsmead Properties to sell its cinema business, mm2 Connect, for S$84.8 million ($63 million). mm2 Asia operates the Cathay chain of cinemas in the city-state.
The deal will require approval from the regulators, as well as approval from shareholders at an extraordinary meeting.
mm2 Asia, which acquired the cinema chain in 2017 for $230 million, announced it entered into a non-exclusive binding term sheet with Kingsmead Properties for the proposed sale of at least 80% of the cinema business in July.
“The cinema business has been a strategic part of the group’s content creation and distribution business, but it has been affected by COVID-19. This proposed sale will stabilise the group’s financial situation and allow mm2 to continue to focus on the development of core production content opportunities,” said mm2 Asia’s founder Melvin Ang.
Proceeds from the deal will be used to repay the group’s borrowings, which include convertible bonds due by 31 December 2021. Expected net proceeds to be received by mm2 Asia are approximately S$67.34 million.
Based on the group’s financial statements for FY2021, the expected loss arising from the transaction will be approximately S$84.66 million.
Entertainment businesses such as mm2 Asia have been drastically hit by the COVID-19 pandemic as events and concerts have been restricted.
According to its annual report, mm2 Asia’s gross profit in FY21 narrowed to S$6 million, compared with FY2020 and FY2019 when gross profit was S$89.4 million and S$124.2 million respectively.
The company’s net loss widened to S$90.8 million in FY21, compared with FY2020’s net loss of S$3.3 million and FY2019’s net loss of S$19.1 million.
mm2 Asia Limited listed on the Catalist Board of SGX-ST in December 2014 and transferred to the Mainboard of SGX-ST in August 2017. Since then, it has also acquired a majority stake in SGX-listed virtual reality, visual effects, and computer-generated imagery studio, Vividthree Holdings Ltd, and SGX-listed event production and concert promotion company, UnUsUaL Limited.
With the establishment of mmCineplexes and the acquisition of Cathay Cineplexes, mm2 Asia was one of the key cinema operators in Malaysia and Singapore.
Last November, the group entered into a share sale agreement to dispose of the entire equity interest in Academie of Stars Pte. Ltd. for a consideration of S$114,000.