Tving-Wavve Merger Hits Roadblock Over Debt Concerns

In a surprising turn of events, the much-anticipated merger between South Korean online video streaming services Tving and Wavve has hit a significant snag. The main point of contention? A staggering 200 billion won ($150 million) debt that Wavve needs to repay.

“Why Should We Pay Wavve’s Debts?”

This question, posed by some of Tving’s shareholders, encapsulates the heart of the dispute. As the merger negotiations enter their final stages, Tving’s investors are pushing back against the idea of the merged company shouldering Wavve’s financial burdens.

The debt in question stems from a convertible bond (CB) Wavve issued in 2019, promising to initiate an IPO by November 2023. With that deadline now passed and no IPO in sight, Wavve faces a steep 9% internal rate of return (IRR) on the bond, up from the original 3.8%.

A Merger in Jeopardy

Industry insiders had expected the merger contract to be finalized by the end of June. However, this latest disagreement threatens to derail the entire process.

“The longer this drags on, the worse it gets for Wavve,” commented a content industry expert. “Tving’s shareholders are likely trying to leverage this situation for more favorable merger terms.”

Uneven Playing Field

The proposed merger already favored Tving, with plans for it to absorb Wavve. Tving boasts 7.31 million monthly active users compared to Wavve’s 4.25 million. Moreover, while Tving maintains a manageable debt ratio of 47.7%, Wavve is effectively insolvent with debts of 321.2 billion won ($240 million) and an operating loss of 80.4 billion won ($60 million) last year.

Shareholder Concerns

Tving’s diverse shareholder base, including CJ ENM (48.9%), KT Studio Genie (13.5%), and Naver (10.7%), complicates negotiations. Each entity has its own interests to protect, making consensus on absorbing Wavve’s debt a significant challenge.

A Cautionary Tale

This merger saga serves as a stark reminder of the risks associated with aggressive growth strategies in the competitive streaming market. Wavve’s promise of an IPO to secure funding has backfired, potentially jeopardizing its future and highlighting the need for sustainable business models in the volatile world of online content streaming.

As negotiations continue, the industry watches closely. The outcome of this merger could set a precedent for future consolidations in South Korea’s increasingly crowded OTT market.

Credit : https://www.sedaily.com/NewsView/2DAL86SEZA