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Major Cineplex Unit to Acquire Media Network Retail Co.

July 2, 2008

By Nuntawun Polkuamdee, Bangkok Post, Thailand

Jul. 1–M Pictures Entertainment, which is 41 percent owned by Major Cineplex, yesterday announced plans to acquire Media Network Retail Co in a deal valued at over 300 million baht.

M Pictures, formerly Traffic Corner Holdings, would also acquire a 97 percent stake in Pacific Marketing and Entertainment Group from Major Cineplex in a separate share swap transaction valued at 395 million baht.

Media Network Retail (MNR) is a leading home entertainment distributor with over 150 points of sale nationwide, including those at modern-trade outlets Tesco Lotus, Tops, Central, The Mall, Robinson and Jusco. The company also has retail space in over 300 Lotus Express branches and over 4,000 7-Eleven convenience stores nationwide.

M Pictures would acquire all four million MNR shares outstanding at a value of 75.435 baht per share through a share swap, with each unit of MNR equal to 17.625 new shares of M Pictures.

Pacific Marketing, meanwhile, is a distributor of VCDs, CDs, DVDs, music and entertainment software. The company also manages film rights for theatres, VCD and DVD sales and cable and network for TV broadcasts.

M Pictures would offer Major Cineplex 9.23 new shares for each share of Pacific Marketing received. The connected transaction must be approved by 75 percent of M Pictures shareholders, with Major Cineplex abstaining.

Both share transactions value each new M Pictures share at 4.28 baht. M Pictures plans to issue 252.8 million new shares at one baht per value, with 162.8 million allocated for the two share swaps and 90 million offered in a rights offering to existing shareholders.

Shareholders registered as of Sept 12 would receive one new share per four shares held at 3.33 baht per share. M Pictures shareholders would vote on the capital increase and share swap at an extraordinary shareholders’ meeting on Sept 4, with the share register to attend closed on Aug 14.

Shares of Major Cineplex on the Stock Exchange of Thailand rose 4.29 percent yesterday to 14.6 baht on trade worth 23.95 million baht, while M Pictures shares fell 7.69 percent to 3.84 baht in trade worth 7.52 million.

Vicha Poolvaraluck, the chief executive of Major Cineplex, said the restructuring would help the group expand its distribution channels to consumers.

“Media Network is a high-growth company with a nationwide distribution network. It’s the only missing piece for the company to complete our entertainment network,” he said.

Mr Vicha said the retail distribution market was valued at five billion baht per year, but had the potential to triple in size over the next several years.

M Pictures, meanwhile, could leverage Media Network to distribute its local and international content.

“We plan to increase our sales in many different ways. The new strategy is to deliver content to the home, similar to how pizzas now can be ordered for home delivery from the internet,” Mr Vicha said.

After the transaction, Major Cineplex would increase its holdings in M Pictures to 45 percent from 41 percent now, and divest its holdings in Pacific Marketing. M Pictures meanwhile would hold 100 percent of both Pacific Marketing and Media Network.

Pacific Marketing reported 2007 losses of 49 million baht on revenues of 517 million. M Pictures posted first quarter losses of 37.18 million baht on revenues of 95.72 million, and 2007 losses of 41.76 million on revenues of 133.8 million.

Major, the country’s largest cinema operator, posted first-quarter profits of 301 million baht on revenues of 1.5 billion, and 2007 profits of 1.22 billion on revenues of 6.75 billion.

Suraphong Triamchanchai, the chief executive officer of M Pictures, Pacific Marketing and Media Network revenues would be consolidated in the company’s accounts in the fourth quarter.

Revenues in 2009 were projected to triple to 1.5 billion baht as a result of the acquisition, he said.

“Media Network will be the main driver of growth for the future. At the same time, we can learn more about customer behaviour and retail marketing, with strategies tailored for each target group,” Mr Suraphong said.

Samart Chuasiriphattana, the managing director of Media Network Retail, said the company’s revenues were growing by 15 percent to 20 percent per year, with net profit growth of 30 percent.

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