The merger between Lotte Cinema and Megabox, which had been expected to shake up the domestic multiplex industry, has been canceled.

Lotte Shopping announced that the Memorandum of Understanding (MOU) signed to pursue the merger expired on June 30. Consequently, the process of combining the two companies has been halted.

The merger discussions, which began in May of last year, were considered a big deal that would have united the second-largest (Lotte Cinema) and third-largest (Megabox) multiplex chains in South Korea. There were expectations that the combined entity would have the competitiveness to challenge the industry leader, CJ CGV.

However, the deal failed to make progress as the MOU deadline was repeatedly extended due to disagreements over corporate valuation, equity ratios, and investment attraction. Furthermore, it appears that the merger plans collapsed as the liquidity crisis at Megabox's parent company, JoongAng Group, led to a court filing for rehabilitation proceedings.

Analysts also suggest that for Lotte, which has recently seen an improvement in performance, there is less incentive to pursue a merger while taking on potential liabilities. Lotte Cultureworks, which operates Lotte Cinema, recorded 124.6 billion KRW in revenue and 7.9 billion KRW in operating profit (consolidated basis) in the first quarter of this year. It was the only one among the three major multiplex chains to successfully turn a profit in its domestic business.

Plus M, an affiliate of Megabox JoongAng, whose merger plans have been called off, is set to release director Na Hong-jin's new film, Hope, on July 15. The film, which has the highest production budget in the history of Korean cinema, is drawing industry attention to see if it will become a beacon of hope for Plus M and, by extension, Megabox JoongAng.