Global Star (NASDAQ:GLST) has entered into a definitive agreement to combine with entertainment firm K Enter, which is to merge with seven South Korean businesses for a total valuation of $610 million, or about 3.9x their 2022 revenue.
Delaware-based K Enter has been set up as a holding company to acquire and develop South Korean media and entertainment enterprises.
The combined company is expected to trade on the Nasdaq once the deal is completed in the late fourth quarter of 2023.
Global Star has about $92 million in its current trust and has not yet announced additional committed financing for the transaction.
The parties have also not yet released their merger documents or an investor presentation, but Global Star’s profile page will be updated once more information is made available.
Quick Takes: Can you SPAC a country’s movie industry?
Global Star looks to be the one to try, merging with a fellow vehicle to lasso together seven South Korean film companies. The most significant of these is entertainment-focused private equity firm Solaire Partners. It has already contributed two officers to K Enter’s senior management with Pyeung Ho Choi stepping in as chairman and Young Jae Lee as CEO.
Choi has served as Solaire’s CEO and President since 2016, according to LinkedIn, and has steered the firm through its investment in individual film productions with some notable payoffs.
Solaire was an anchor investor in the highly acclaimed “Parasite”, which won Best Picture at the 2020 Oscars, as well as South Korean hit comedy “Extreme Job”, which delivered it 370% returns, according to the Korean Economic Daily.
Korean Economic Daily reported that the three film production companies to be absorbed in the transaction are Bidangil Pictures, The Lamp Ltd., and Apeitda Production.
Bidangil’s sci-fi film “Space Sweepers” spent time as the most-watched movie on Netflix (NASDAQ:NFLX) globally after its 2021 debut, while Lamp is known for South Korean hit “A Taxi Driver” and Apeitda for the Netflix original film “Carter”.
But despite their global success, these South Korean productions also shared in common with “Parasite” and “Squid Game” a low share of just 10% to 20% of profits on streaming platforms.
Independent South Korean production houses just don’t have the scale to leverage better terms out of the streamers, but Pyeung Ho Choi told the Korean Economic Daily that K Enter’s plan is to unite enough of them to flex greater muscle for the local industry in negotiations.
Filling out the new organization alongside the film studios is a drama production company, an IP merchandising firm and a virtual entertainment firm. The latter of these is reportedly First Virtual Lab Co. (FVL).
FVL operates three sound stages as of last summer and it announced it would launch an exclusive collaboration with US digital effects firm Monolith by the end of 2022. Monolith manages virtual set effects for ongoing productions like “The Mandalorian” and the two aim to set up studio space to provide similar VFX capabilities locally to the South Korean film industry.
This deal is not the first foray by SPACs into the movie business, but the reviews of these efforts have so far been mixed. Pathfinder closed a combination with motion-capture technology firm Movella (NASDAQ:MVLA) in February.
Sports Ventures also announced a $1.7 billion combination with DNEG, the London-based VFX studio behind the “Dune” among others, last January. But as the market soured, DNEG paid a $1.5 million breakup fee to hold off on its public debut terminating the deal in June, and Sports Ventures eventually liquidated.
As a target, K Enter is perhaps more analogous to Risee Entertainment and Reliance Studios, which announced a still-pending combination with International Media (NASDAQ:IMAQ) in October. The Mumbai-based studios would make for the first Indian film presence in US markets, albeit they would likely represent a much smaller portion of the massive Bollywood industry.
K Enter, meanwhile, could make for a unique pure-play stock on the South Korean film industry that would have the potential to energize retail trading, particularly if it has a few more Squid Games up its sleeves.
The big question with this transaction is how much capital it will need to tie together these acquisition targets and fuel them forward. Global Star does not currently have any committed capital in the deal, and its fellow SPACs underwritten by EF Hutton have averaged 98.7% redemptions.
A similar rate would leave Global Star with just $1.2 million in trust, which would likely be short of what would be necessary to even cover transaction expenses. But, again, Solaire Partners is at the center of this transaction, and it may have investment capital of its own to deploy.
Pyeung Ho Choi was also a founding partner in South Korea’s largest movie theatre chain, CJ CGV (KSE:079160), so he may have a deep pocket personally. If indeed K Enter has little need for additional capital, then opting for a SPAC partner that had a small trust from the start could have advantages for the post-close balance sheet.
- Lee & Ko L.L.P. is serving as Korean legal advisor and Loeb & Loeb LLP is serving as U.S. legal advisor to K Enter.
- PWC is serving as Auditor to K Enter.
- KPMG is serving as the financial advisor to K Enter Holdings Inc.
- Nelson Mullins Riley & Scarborough LLP is serving as legal advisor to Global Star Acquisition Inc