Malaysia’s iflix tells staff Tencent is buying loss-making streaming platform
It is understood that there is a transaction in advanced stages but it has not concluded yet, said sources who declined to be identified.
Terms of the potential deal are not known, but pricing is expected to value iflix at a significant discount to what the company could have gotten from an initial public offering (IPO) before the COVID-19 pandemic soured investors on loss-making companies.
In an e-mail sent to employees on Tuesday, Tencent, on behalf of iflix, offered the platform’s workforce the option to transfer to the local unit of the internet giant with a June 25 deadline to accept the offer.
When contacted by DealStreetAsia, iflix declined to comment. Tencent had not responded to a request for comment at the time of publishing.
DealStreetAsia reported on June 10 that the platform was in talks with two potential acquirers, who were believed to include companies that are based in Greater China. On Wednesday, The Business Times reported that Australia-based Crown Media and Entertainment, a firm led by former executives from Murdoch Media and News Corp, had also submitted a bid for iflix.
Meanwhile, a Variety report citing unidentified sources on Wednesday said that iflix has informed content partners of its impending sale to Tencent.
iflix is weeks away from a debt crisis. Holders of just over $47.5 million of convertible debt could force the company to repay them if the company is not listed by July 31. Two iflix co-founders — Catcha Group co-founders Patrick Grove and Luke Elliott — stepped down from its board on April 9, while distressed asset specialists Ryan Shaw and John Zeckendorf from Mandala Asset Solutions joined a month later.
An early redemption of the convertibles could tip iflix into insolvency. As at September 2019, iflix had just $12.7 million of cash reserves, and the company estimated that it would only have enough capital for ongoing corporate and administrative overheads until November 30, 2019. iflix has not announced any additional funding since then.
The company recorded a net loss of $158.1 million in 2018 as its operations burnt through $25.5 million of cash, resulting in a net liability position of $68.6 million as at end-2018.
That included $77.7 million of negative working capital.
Tencent already operates WeTV, a video streaming website that focuses on Asian content. An acquisition of iflix would give Tencent an over-the-top streaming player with a regional focus. If a deal is concluded, a key question will be whether iflix could be merged with WeTV or whether the two streaming platforms will be operated separately.
A check on iflix’s app on Google’s Play Store and Apple’s App Store showed the iflix app listed under developer Ren Feng Media Tech Inc, the mobile app arm of Tencent.
iflix’s investors include Fidelity International, Hearst Communications, EDBI and Liberty Global.