A radical shake-up of the South Korean film industry is in the offing, with major CJ Entertainment reportedly entering final negotiations to acquire 40% of Plenus Entertainment, owner of the industry's second major studio, Cinema Service.

According to a report by local magazine Film 2.0 today, representatives from both sides have acknowledged that negotiations are taking place, and inside sources maintain that only fine-tuning remains before a final deal is signed.

Should the deal go through, the result would be a vertically integrated company that would tower over all others in film finance, production, distribution, and exhibition.

Cinema Service oversees the nation's strongest product lineup, with 20 in-house features scheduled for release in 2003 in addition to imported titles like The Return Of The King and Terminator 3. It also operates its own studio/post production complex, a video/DVD arm, a small film school, a talent management company and a fledgling multiplex chain known as Primus Cinema.

CJ Entertainment, a founding shareholder of DreamWorks SKG, also boasts a strong lineup of domestic and imported titles, as well as inroads into cable TV, a video/DVD business and a managing stake in top-ranked cinema circuit CGV. In 2002, Cinema Service and CJ Entertainment performed far ahead of other local and Hollywood distributors with 22.3% and 18.0% of the market respectively.

CJ Entertainment is reportedly interested in purchasing the 24.1% stake in Plenus Entertainment held by local firm Locus Holdings as well as a 15.9% share owned by the U.S.-based Warburg Pincus (of the remainder, Plenus management owns 21% and 39% is publicly owned). The sale is expected to be in the $50-58m range.

Plenus is said to have had talks with local conglomerate SK and other local and foreign investors, but reportedly favors CJ Entertainment for its long-term commitment to the film industry.

News of the potential merger has sent shock waves through the industry, with major upheaval predicted for mid-sized local distributors such as A-Line, Korea Pictures, Cineworld and Showbox should the deal go through.