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Korea’s CJ Orders Up Merger of Media and Shopping Units

CJ E&M, South Korea’s largest film and TV group, is set to merge with CJ O Shopping, the CJ group’s home shopping and e-commerce business.

The move was proposed at a board meeting Wednesday and is set to go ahead in August, if it receives approval in June from both sets of shareholders.

“The decision was based on a strategic point of view that the combination of CJ O Shopping and CJ E&M’s business abilities can mark the start of a global media commerce company… and help them gain competence in the rapidly changing media industry,” the two said in a joint statement.

In an investor presentation, the two said that the new group, which would continue under the CJ O Shopping name, would combine strengths in merchandise and commerce (from CJ O Shopping) and content production and distribution (from CJ E&M).

CJ E&M spans market leading film production and distribution company CJ Entertainment, as well as TV channels Mnet and tvN. It also has a stake in South Korea’s leading multiplex chain CJ-CGV, which has a separate share listing.

The companies pointed to a changing corporate landscape, in which a media big bang has already taken place and in which companies are now engaged with a series of new competitors in a “cross-business battlefield.”

The presentation pointed to examples in North America (where Disney is poised to swallow Fox, and Amazon and Netflix are the new powerhouses,) Europe (where companies including TF1, ProSieben and Mediaset are seeking alliances that increase scale and global competences,) and in China (where IP is now the basis for media-commerce expansion and giants Alibaba and Wanda have become corporate predators).

In addition to the current media, content and commerce activities, the companies say that logical expansion would include theme parks, animation and toys, as well as data businesses.

The combined company is forecast to have revenues of $4.1 billion (KRW4.4 trillion) in the current year, and operating profit of $326 million (KRW350 billion) won. They target annual sales growth of 15% per year through 2021.

Significantly, a large proportion of the anticipated growth will come from outside Korea. Currently the two earn 17% of revenue abroad. In three years they anticipate that rising to 32%. Achieving that involves aggregating competencies in Vietnam, Malaysia, Thailand and Turkey. CJ-CGV already has theater operations in Vietnam and Turkey, which have helped CJ Entertainment to put down roots as a producer distributor.

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