Korea’s Lotte Cinema-Megabox Merger Collapses as JoongAng Group’s Financial Crisis Deepens

The proposed merger between Lotte Cinema and Megabox, which would have created South Korea’s largest theatrical exhibitor, has officially collapsed after roughly 14 months of negotiations, with the deal ultimately undone by a financial crisis engulfing Megabox’s parent company, JoongAng Group.

Lotte Shopping and Contentree JoongAng disclosed Wednesday that the memorandum of understanding governing the merger between Lotte Cultureworks and Megabox JoongAng lapsed as of June 30, formally ending the process. The two sides had signed the original MoU in May 2025 and extended it three separate times as they worked through deal terms, most recently pushing the deadline to June 30.

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Had it closed, the merger would have pushed the combined company’s national screen share to nearly 50%, vaulting it past longtime market leader CJ CGV to become Korea’s top exhibitor. Instead, the local theatrical market stays in its existing three-way competition among CGV, Lotte Cinema and Megabox.

According to the Korean Film Council, total theatrical revenue in Korea fell 12.4% to KRW1.047 trillion ($673.1 million) in 2025, with admissions down 13.8% to 106.09 million – the second consecutive annual decline. The market has shown a notable rebound this year, however: box office revenue for the first half of 2026 reached an estimated KRW539.7 billion ($347 million) on some 53.19 million admissions, up from KRW407.9 billion ($262.3 million) and 42.5 million admissions in the same period last year, according to KOBIS ticketing data.

Negotiators had been unable to bridge disagreements over how to finance the combined entity, including credit-enhancement terms and collateral structure. Because Megabox leases most of its theater properties, it had little collateral of its own to offer investors, while the parent-company credit backing that outside investors demanded could not be supplied by Contentree JoongAng or holding company JoongAng Holdings amid their own liquidity troubles. The two sides had been seeking up to KRW400 billion ($257.2 million) in outside investment to support the deal.

The final blow came when Contentree JoongAng and Megabox JoongAng filed for court-supervised rehabilitation on June 14, a move that forced a full reassessment of Megabox’s assets and made the merger’s original equal-partnership structure untenable.

The rehabilitation filing was part of a broader liquidity crisis that has swept through JoongAng Group since June 12, when broadcaster JTBC declared default after failing to repay KRW20.6 billion ($13.2 million) in securitized borrowings at maturity. Credit-rating agency NICE Investors Service subsequently slashed JTBC’s unsecured bond rating from BBB Negative to CCC, while Korea Ratings downgraded it from BBB Negative to BB under negative review.

Two days later, on June 14, JoongAng Holdings, Contentree JoongAng, Megabox JoongAng and JoongAng P&I all filed for court rehabilitation with the Seoul Bankruptcy Court. JTBC itself filed on June 15, alongside a request for an Autonomous Restructuring Support program that would allow it to negotiate directly with creditors before entering formal proceedings. JoongAng Group vice chair Hong Jeong-do apologized at a news conference. He attributed the filings to a prolonged capital-market contraction compounding the company’s accumulated financial burdens.

The crisis traces in part to JTBC’s costly, unsuccessful bet on strong viewership for the Milan Winter Olympics earlier this year, layered on top of a slumping advertising business. The network had broken from Korea’s traditional joint-rights system with KBS, SBS and MBC to independently acquire broadcasting rights to the 2026-2032 Olympic Games and 2026-2030 FIFA soccer World Cup; for the World Cup, it later resold a portion of those rights to KBS for KRW14 billion ($9 million) but failed to reach similar deals with the other two networks.

On June 30, the Seoul Bankruptcy Court approved JTBC’s request to pause its rehabilitation decision for one month, until July 30, while it negotiates with creditors. For the other four affiliates, the court moved forward with formal rehabilitation, keeping existing management in place as court-appointed administrators rather than installing outside receivers. Final rehabilitation plans are due from Megabox JoongAng by Dec. 1, Contentree JoongAng by Dec. 15, and JoongAng P&I and JoongAng Holdings by Dec. 22.

JoongAng Ilbo, the group’s flagship newspaper, is pursuing a separate, creditor-led workout program rather than court rehabilitation, noting it operates independently from the affected affiliates and has posted 13 consecutive years of operating profit. Content-production affiliate SLL JoongAng has also avoided rehabilitation and recently repaid a KRW5 billion ($3.2 million) short-term bond in full, fueling market speculation that JoongAng Group may look to sell the unit as part of its broader restructuring.

With the merger dead, Lotte Cultureworks plans to lean into its own momentum: the company posted first-quarter consolidated revenue of KRW124.6 billion ($80.1 million) and operating profit of KRW7.9 billion ($5.1 million), the only one of Korea’s three major multiplex operators to swing its local business into profit this year. The company plans to expand recliner seating, upgrade projection technology, add sound-specialized auditoriums and grow an owned-IP content business.

Megabox, meanwhile, is prioritizing cost efficiency and financial stability as it moves through rehabilitation. Lotte could still emerge as a sole acquirer of Megabox down the line through a pre-approval M&A process, which would let a buyer take on Megabox’s valuable assets while shedding much of its debt under court supervision, though a combined entity’s roughly 55% audience share would likely draw antitrust scrutiny from Korea’s Fair Trade Commission.

The turmoil arrives just ahead of a high-stakes release for Megabox affiliate PlusM Entertainment: Na Hong Jin‘s “Hope,” which premiered in Cannes’ main competition this year. The film stars Hwang Jung-min, Jo In-sung, Jung Ho-yeon, Michael Fassbender and Alicia Vikander. PlusM is distributing the film in Korea, with Neon handling North American distribution. “Hope” is set for release in Korea on July 15.

As revealed by Variety, Na is also set to receive the Daniel A. Craft Action Cinema Award at the New York Asian Film Festival, which runs July 10-26, where “Hope” will screen July 20 as the festival’s centerpiece gals alongside a full retrospective of the director’s work.