Emart bets 1.36 trillion won on U.S. content, spends 2.2 trillion won in two months including SSG [fn Market Watch]

[Financial News] Emart's financial burden is expected to increase again after it committed more than 1.3 trillion won to the merger deal between Paramount Skydance and Warner Bros. Discovery. Including its acquisition in August of the stake held by a financial investor (FI) in SSG.com, the non-recurring equity investment alone amounts to nearly 2.2 trillion won in just over two months. That exceeds Emart's full-year EBITDA last year.
Song Young-jin, a senior researcher at NICE Credit Rating, said in a report on the 7th, "While content partnerships are expected to expand Emart's business base, its financial burden has increased as investments on a scale that is excessive relative to its cash-generating capacity were made over a short period."
Emart recently acquired a 100% stake in RB Tentpole Co-Invest (P) Offshore, LP for $1 billion through its U.S. subsidiary Starfield Properties.
At the exchange rate applied in the disclosure, the amount is 1.3596 trillion won. Through the fund, Emart will indirectly invest in new shares issued as part of the merger between Paramount Pictures and Warner Bros.
Emart plans to integrate the film, television and OTT intellectual property (IP) held by the two companies into its shopping malls, including Starfield, and Hwaseong Star Bay City. It is also considering expanding experience facilities and themed spaces, and linking streaming services with memberships offered by Shinsegae affiliates.
The issue is the pace of investment. In August, Emart spent 827.5 billion won to acquire the FI's stake in SSG.com. Adding the 1.3596 trillion won for the latest investment brings the total for the two deals to 2.1871 trillion won. That is 375.3 billion won more than last year's consolidated EBITDA of 1.8118 trillion won. In effect, investments exceeding a year's cash-generating capacity have been concentrated in a short period.
NICE Credit Rating estimated that, assuming the funds for both investments are raised entirely through external borrowing, Emart's total borrowings would rise from 12.7646 trillion won at the end of June to 14.9517 trillion won.
Net debt would also increase from 9.8701 trillion won to 12.0571 trillion won. The debt ratio is projected to rise from 133.7% to 155.7%, and the borrowing-dependence ratio from 34.6% to 39.0%.
Emart currently has a credit rating of AA- (Stable) from NICE Credit Rating. A borrowing-dependence ratio that persistently exceeds 50% would be a factor for reviewing a downgrade, but the estimate after these investments is 39%, still well below the threshold. The market believes that if Emart fails to boost customer traffic and profitability by integrating global content IP into existing businesses such as Starfield, the increased debt burden could put pressure on its financial indicators first.
Song noted, "It will take time for content partnerships to produce tangible improvements in earnings," adding, "In the short term, the financial burden relative to earnings-generating capacity will be higher than in the past."

[email protected] Kim Hyun-jung Reporter