[Exclusive] Native OTT 'Tiving·Wave' Merger Faces Collapse Risk

Tving and Wavve Merger to Curb Netflix's Dominance Faces Collapse
Unreasonable Demands by Major Shareholder SLL Joongang Cited as Cause

The merger between the domestic online video services (OTT) CJ ENM's 'TVING' and SK Square's 'Wavve,' which was seen as a card to block Netflix's dominance, is on the verge of collapse.

According to the investment banking (IB) industry on the 11th, although negotiations for the merger between TVING and Wavve reached agreements on key issues such as the specific merger ratio and the burden of redeeming convertible bonds (CB), the talks broke down last week due to unreasonable demands from SLL Joongang, a major shareholder of TVING.

An anonymous negotiation official said, "We reached an agreement on the merger ratio, corporate value, and convertible bonds, but SLL Joongang kept making unreasonable demands to the merged corporation, and after long negotiations, we failed to narrow the gap on this issue, so the merger is almost collapsed," adding, "The possibility of renegotiation is low."

The core reason cited for the breakdown in negotiations was SLL Joongang's demand for different supply conditions compared to other broadcasters, specifically requesting higher supply fees. It is also known that they demanded cashing out some shares as a condition for supporting the launch of the merged corporation. A negotiation official said, "CJ accepted even the demand for cashing out some shares, but we could not narrow the gap on the upgraded supply conditions."

Initially, the key issues at the merger negotiation table were the merger ratio between the two companies and the burden of redeeming Wavve's convertible bonds. Regarding this, the merger ratio between TVING and Wavve was agreed upon as 1.6 to 1, and the corporate value of the merged company was set at 2 trillion won, with major shareholders reaching an agreement around April.

They also narrowed differences on the issue of the merged company bearing a significant portion of the 200 billion won worth of convertible bonds held by Wavve, reaching a consensus in June. However, after signing a memorandum of understanding (MOU) for the merger in December last year, negotiations dragged on for more than seven months but failed to reach a final agreement due to SLL Joongang's unexpected actions.

SLL Joongang is a major shareholder holding 12.8% of TVING's shares. A legal expert familiar with mergers and acquisitions (M&A) said, "Legally, a shareholder holding 12.8% cannot block the merger itself, but it can vary depending on shareholder agreements, and if the merger is forced despite shareholder opposition, the opposing shareholders' shares must be bought out in cash, making the merger practically difficult."

Regarding this, SLL Joongang denies the claims, stating, "We have not demanded higher supply fees compared to other broadcasters or requested cashing out some shares."

Meanwhile, looking at TVING's shareholder composition, the largest shareholder is CJ ENM (48.9%), followed by KT Studio Genie (13.5%), Zen Partners & Company (13.5%), SLL Joongang (12.8%), and Naver (10.7%). For Wavve, the major shareholders are SK Square (36.7%), Munhwa Broadcasting Corporation (19.8%), SBS (19.8%), and KBS (18%).