<This image shows the logos of Lotte Cultureworks (top) and Megabox JoongAng Inc., as provided by the respective companies.>

South Korean media giant JoongAng Group and retail conglomerate Lotte Group signed an agreement Thursday to merge their respective affiliates that operate Megabox and Lotte Cinema – the country's third- and second-largest movie theater chains.

JoongAng Group announced that it signed a memorandum of understanding (MOU) with Lotte Group for the merger of Megabox JoongAng Inc. and Lotte Cultureworks.

It added the joint venture will be co-managed by both companies and they intend to proceed with attracting new investment and the Fair Trade Commission's review of the business combination as quickly as possible.

Details of the merger plan will be decided through further discussions, officials said.

JoongAng Group's entertainment arm, Contentree JoongAng, holds a 95.98 percent stake in Megabox JoongAng, while Lotte Group's Lotte Shopping owns an 86.37 percent stake in Lotte Cultureworks.

JoongAng Holdings, the group's holding company, said the agreement was reached following discussions aimed at strengthening competitiveness and ensuring long-term sustainability in their cinema and film businesses.

Lotte Cultureworks operates Lotte Cinema, the movie distribution and investment firm Lotte Entertainment and the Charlotte musical theater chain. Megabox JoongAng oversees the Megabox cinema chain; PlusM Entertainment, a film investor and distributor; and Playtime JoongAng, which runs indoor playgrounds for children.

If completed, the merger is expected to reshape the domestic cinema industry by creating a two-horse race between CGV -- the current market leader -- and the new entity.

According to the Korean Film Council, CGV operated 1,346 screens nationwide in 2024, the most among the country's cinema chains. Lotte Cinema had 915 screens and Megabox had 767, for a combined total of 1,682 -- surpassing CGV.

Industry watchers are also closely eyeing the potential integration of Lotte Entertainment and PlusM Entertainment. Alongside CJ ENM, Showbox and NEW, both are key players in South Korea's film distribution sector.

The two groups expressed hope that the merger will help revitalize the domestic film industry, which has yet to fully recover from the impact of the COVID-19 pandemic.

By Shim Sun-ah