Chapter 564: CJ E&M

The performance of the Hollywood blockbuster The Wolfman in North America was indeed disappointing. It was taken off screens after a month, earning only $62 million domestically and $77 million overseas, failing to reach even $150 million globally. This shut the door on Capet Pictures' commercial attempts at horror monster movies.

Meanwhile, the Oscars ceremony successfully concluded with Kathryn Bigelow's The Hurt Locker defeating her ex-husband James Cameron's globally popular special effects blockbuster Avatar to win Best Picture.

Nicole Kidman, with her outstanding performance in The Blind Side, won the Oscar for Best Actress again after 8 years.

Avatar, which was a hit worldwide, grossed over $700 million in North America and more than $1.9 billion overseas markets, piling up a series of box office champion titles in various countries and regions. 

"Did you send her to the airport?" Charles asked when he saw Son Ye-jin return.

Son Ye-jin nodded, "Yeah, she said there were too many things to do, so she couldn't stay long."

Gao Yuanyuan didn't stay long in Seoul either, spending much of her time studying the Korean idol trainee system within East Asia Korea. It seemed she was curious about the trainee system in Korea.

"Hollywood's Alice in Wonderland premiered in Korea. Did you see it?" Charles asked again.

"Not yet, but I heard it's very popular," Son Ye-jin replied as she sat next to Charles.

"Yeah, it grossed over $115 million its opening weekend in North America," Charles said, pursing his lips. It seemed Disney found a money-maker, adapting animated features into live-action films.

Just look at The Wolfman, with a production cost of over $150 million, and grossing only about the same amount, globally!

"By the way, we're going to the banquet at Shilla Hotel tonight. Lee Jae-hyun invited me," Charles said, lifting the woman's chin.

"There should be quite a few Korean entrepreneurs attending. It's good for you to network," he added.

Son Ye-jin nodded. Now, as a president, Son Ye-jin was different. She used to be just an actress.

Although some top actors in Korea formed their own talent agencies, they mostly participated in their own projects.

"Alright, change clothes. We're going to the banquet at Shilla Hotel," Charles said, standing up. Lee Jae-hyun was probably already waiting. The NHN shares were quite attractive.

In the evening, Charles and Son Ye-jin arrived at the Shilla Hotel. Lee Jae-hyun personally received them. 

"Charles, good evening. Ye-jin is getting more and more beautiful. CJ wants you to be the leading actress in their projects," Lee Jae-hyun greeted with a smile.

Following Charles' cue, Son Ye-jin smiled and replied, "Thank you, Chairman Lee. I'll carefully read the scripts!"

Currently, Son Ye-jin no longer accepted TV drama scripts and had requirements for movie projects, avoiding intimate scenes.

"Charles, regarding NHN, CJ is willing to buy a 5% stake at a valuation of 26 trillion won, for 1.3 trillion won. How about it?" Lee Jae-hyun offered an attractive price.

NHN's current valuation was 19 trillion won, approximately $14.6 billion. CJ offered a 36% premium, but Charles wouldn't accept it.

In a few years, NHN's valuation could surpass 60 trillion won.

"Chairman Lee, you're offering without sincerity. Look at the stock prices of Alibaba and Tencent; how much have they risen?" Charles shook his head. Even if Korea needed the overseas market, a 36% premium was too little.

...

"1.45 trillion won, and CJ can offer shares in its entertainment companies as a return," Lee Jae-hyun added.

The 1.45 trillion won for the 5% stake valued NHN at 29 trillion won, a premium of about 53%.

Charles' desired valuation was around a 60% premium. Considering CJ's numerous entertainment companies, and East Asia Korea needing a talent agency to cultivate idol artists, it could be considered.

"Let me discuss this with others," Charles shook hands with Lee Jae-hyun.

"Alright, no rush. Take your time, Charles," Lee Jae-hyun said, leaving the room.

"Call and find out which CJ entertainment companies meet our requirements," Charles patted Son Ye-jin's thigh.

"Oh, okay," Son Ye-jin responded, realizing they were talking in trillions now!

...

"Charles, the CGV chain, which is a subsidiary of the CJ Group, can be a good choice. Capet Cinema operates high-end multi-functional theaters, which match our CGV model perfectly. We can work together!" Li Zai-hsien and Charles stood upstairs, overlooking the crowds in the lobby while chatting.

Previously, they had already discussed that CJ would acquire 5% of NHN's shares, although there were still some details left to finalize.

"I have no interest in low-end theaters in small cities. Capet Pictures' plan in Asia is to have 150 multi-functional cinemas and 20 IMAX theaters by the end of 2012, with a total of over 1,500 screens," Charles smiled. "Capet Cinemas isn't a franchise; it's a joint venture!"

"CGV also pursues a high-end model," Li Zai-hsien nodded.

"Cooperation would be great. We can discuss this with the Asia-Pacific region head of Universal International," Charles added, thinking this would accelerate the renovation of multi-functional theaters with CGV's involvement.

"By the way, we at CJ are planning to integrate all our entertainment industries, including broadcasting, movies, music, cultural performances, and gaming, to form CJ ENM," Li Zai-hsien suddenly suggested, "How about we swap 5% of NHN's shares for 1.3 trillions of won plus 5% of CJ ENM's shares?"

Though CJ's entire entertainment industry intrigued Charles, he was particularly interested in ETDIA, the holding company for the music television station and artist management firm. However, 5% of CJ E&M wouldn't suffice.

"CJ owns 16% of YG's shares, right? Include that in the deal," Charles proposed.

Currently, the three major entertainment companies in Korea were SJE, YP, and YG, with YG seeking to go public in Korea. East Asia had considered investing in YG earlier, after advice from Lily Ying, and knew CJ acquired around 16% of YG's shares in 2008 for about 30 billion won. An increase wouldn't impact them much.

Li Zai-hsien didn't hesitate, "Alright, the YG shares can be included in the deal," figuring CJ could buy more YG shares if needed.

"Cheers!" Charles clinked his glass with Li Zai-hsien.

"Cheers, to a successful collaboration..."

After finishing the chat with Li Zai-hsien, Charles thought about leaving, as he wasn't in the mood to stay.

"Oppa, I asked already, CJ's music TV station has the most..." Son Ye-jin, seeing Charles return, hurried to remind him.

"Relax, it's settled," Charles said, wrapping an arm around Son Ye-jin's waist, "CJ Group will merge all its entertainment sectors into CJ E&M. I sold 5% of NHN's shares to CJ Group for 1.3 trillions of won, and CJ Group will also give East Asia 16% of YG's shares and 5% of CJ E&M shares!"

[Note: Valuations in USD:

NHN: About 23 billion dollars. 5% stake is 1.15 billion.

CJ E&M: About 2 billion dollars. 5% stake is 100 million.

YG: CJ E&M bought 16% for 23 million in 2008.

So, 5% stake in NHN is nearly a billion dollars + 100 million + 16% stake in YG.

]

As for the YG shares and 5% of CJ E&M, Charles planned to inject them directly into East Asia Korea, since East Asia Korea's major shareholder was its parent company East Asia Media.

East Asia Media owns subsidiaries Red Fruit Entertainment, East Asia Korea, and East Asia Japan, with Red Fruit Entertainment being the most valuable. Lily Ying had also orchestrated a move for Red Fruit Entertainment to hold reverse shares in East Asia Media!

1.3 trillion won translated to nearly a billions of dollars, giving Charles a large cash flow.

"CJ E&M, YG?!" Son Ye-jin was momentarily stunned, "YG is really impressive, and CJ E&M will surely be even more impressive!"

Charles bent down to whisper in her ear, "These shares belong to East Asia Korea, and you will become a director in both YG and CJ E&M. Even though your shares in East Asia Korea will be diluted after the merger, they will become more valuable!"

In East Asia Korea, East Asia Media held 51% as the controlling shareholder, Son Ye-jin held 30%, the manager had 10%, and the remaining shares were reserved for future employee incentives.

Charles didn't personally hold shares but held them through East Asia Media. Now, he planned to exchange some of his personal shares for future gifting.

Not many, just 30% personal shares in East Asia Media, making East Asia Media the largest shareholder and Charles the second-largest shareholder with 30%, while the local Korean side would hold the rest including the share pool.

"Oppa, can I... can I really do this?" Son Ye-jin hesitated, although as the representative of East Asia Korea, the main management was still done by her manager partner.

"Of course you can," Charles smiled, giving her a kiss on the cheek.

Son Ye-jin nodded, her excitement making her tremble a bit.

*****

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