South Korean major CJ Entertainment announced on April 4 that it had called off its proposed merger with rival studio Cinema Service, which would have created the Korean film industry's biggest-ever company.

Disagreements over price are reported to be the primary reason for the cancellation, although a change in fortunes for the two companies is also believed to have contributed to the decision.

CJ Entertainment originally signed a memorandum of understanding on January 29 to purchase a 28.3% share of Plenus Entertainment, the parent company of Cinema Service. Negotiations continued after the MOU's expiry on March 24, but with CJ offering much less than the originally stated $11.60 (Won 14,500) per share, the two companies ultimately agreed to call off the merger.

The proposed merger was thought to have been primarily motivated by cash flow difficulties at Plenus Entertainment combined with the under-performance of major films in CJ Entertainment's 2002 line-up.

However, with the financial situation at Plenus improving in recent months and the runaway success of CJ Entertainment-financed My Tutor Friend, there was seen to be less need on both sides to carry out the deal.

Protests against the merger by a collection of citizens groups, together with the possibility that the deal could be blocked by Korea's Fair Trade Commission, may have also been factors in the decision.

Most industry observers greeted the news with relief, as many had worried that the creation of such a large company would have had a distorting effect on the rest of the industry.

In 2002, Cinema Service accounted for a leading 22% share of Korea's total market, with CJ Entertainment following behind at 18%. Together the two companies controlled over 60% of the box-office for local films.