DEFM14A: Global Star Acquisition Inc. Seeks Stockholder Approval for Merger with K Enter Holdings Inc.

Global Star Acquisition Inc. is soliciting stockholder approval for a proposed business combination with K Enter Holdings Inc., involving a reincorporation merger and subsequent acquisition merger.

Summary

• Global Star Acquisition Inc. (Global Star) is seeking stockholder approval for a business combination with K Enter Holdings Inc. (K Enter).
• The business combination involves Global Star reincorporating to the Cayman Islands by merging with K Wave Media Ltd. (PubCo), a wholly-owned subsidiary, followed by GLST Merger Sub, Inc. merging with K Enter, making K Enter a wholly-owned subsidiary of PubCo.
• The aggregate consideration for the Acquisition Merger is $590,000,000, payable in the form of 59,000,000 newly issued PubCo Ordinary Shares valued at $10.00 per share.
• Global Star stockholders will vote on proposals to approve the reincorporation merger, the acquisition merger, governance matters, election of directors, an equity incentive plan, and adjournment of the special meeting if necessary.
• Upon consummation of the Business Combination, Global Stars public stockholders are expected to own approximately 3.3% of the issued PubCo Ordinary Shares, the Sponsor and Initial Stockholders will own approximately 4.5% of the issued PubCo Ordinary Shares, and K Enters current stockholders will own approximately 92.2% of the issued PubCo Ordinary Shares.
• The closing of the business combination is subject to certain conditions, including K Enters acquisition of the controlling equity interests of the Six Korean Entities.
• Global Stars Initial Stockholders and the Sponsor, who owned approximately 69.1% of the issued and outstanding GLST Common Stock as of the record date, have agreed to vote their respective shares in favor of each of the Reincorporation Merger Proposal and the Acquisition Merger Proposal and are expected to vote in favor of the Incentive Plan Proposal, the Adjournment Proposal and the Director Proposal.
• Global Star estimates that the per-share price at which public shares may be redeemed from cash held in the trust account will be approximately $11.45 per share, subject to reduction for the payment of taxes, at the time of the Special Meeting.

Sentiment

Score: 5

Explanation: The document presents a mix of positive and negative aspects. While the merger itself is a positive step, the potential for dilution, the need for additional financing, and the risks associated with K Enter's business model temper the overall sentiment.

Positives

• The business combination would allow K Enter to become a publicly listed company.
• The Sponsor and Initial Stockholders are committed to voting in favor of the merger, increasing the likelihood of approval.
• Stockholders have the option to redeem their shares for cash.

Negatives

• K Enter currently has limited operations and does not presently own a controlling interest in any other entities.
• The financial projections informing the Second Fairness Opinion vary significantly from the actual results achieved in 2023 and the results for the first six months of 2024.
• The financial projections upon which the Second Fairness Opinion is based assumed that the Business Combination would occur on or before March 31, 2024.
• Global Star estimates that the per-share price at which public shares may be redeemed from cash held in the trust account will be approximately $11.45 per share, subject to reduction for the payment of taxes, at the time of the Special Meeting.

Risks

• Investing in PubCo securities involves a high degree of risk.
• The closing of the business combination is subject to certain conditions, including K Enters acquisition of the controlling equity interests of the Six Korean Entities.
• If redemptions by Global Star public stockholders cause Global Star to be unable to meet this closing condition, then Global Star may not be required to consummate the Business Combination, although Global Star and K Enter may, in their sole discretion, waive this condition.
• The exercise of the PubCo Warrants by some, but not all, of the warrant holders will result in dilution to the former Global Star public stockholders not exercising such PubCo Warrants.
• The financial projections informing the Second Fairness Opinion vary significantly from the actual results achieved in 2023 and the results for the first six months of 2024.
• The failure to raise adequate PIPE financing will delay PubCos ability to invest in new media content, which will adversely impact revenues and cash flow during 2024 and 2025.

Future Outlook

Global Star and K Enter intend to use their best efforts to complete a $50 million PIPE Financing that would result in further dilution, but the amount of such dilution cannot be determined until the terms of the PIPE Financing have been negotiated.

Management Comments

• On behalf of the Global Star board of directors, I thank you for your support and Global Star looks forward to the successful consummation of the Business Combination.
• Global Stars management believes the assumptions included in the financial projections to be reasonable, based on currently available information and professional judgement and experience, which are inherently uncertain and difficult to predict and many of which are beyond Global Stars control.

Industry Context

The announcement relates to the SPAC market and the trend of SPACs seeking merger targets. It also touches upon the growing popularity of Korean entertainment content and the increasing investments in this sector.

Comparison to Industry Standards

• The KPMG Valuation Report is based upon pro forma financial projections for the Seven Korean Entities provided to Global Star for fiscal years 2023 through 2027 (First K Enter Pro Forma Projections), assuming that K Enter had consummated the acquisition of the Seven Korean Entities.
• For the discounted cash flow analysis, KPMG applied the weighted average cost of capital (WACC) of approximately 11.2%, based on market date including market capitalization, equity risk premiums and market volatility, as of December 31, 2022, of U.S. publicly traded peer companies engaging in similar businesses to K Enter Holdings and its 6 potential subsidiary companies, including AMC Entertainment Holdings Inc, Chicken Soup for the Soul Entertainment Inc, Fox Corp, Lions Gate Entertainment Corp, Madison Square Garden Entertainment Corp, Netflix Inc, Paramount Global, Liberty Media Corp Liberty SiriusXM, the Walt Disney Co, Warner Bros Discovery Inc, Warner Music Group Corp and Cinedigm Corp.
• For the peer trading multiple analysis, KPMG collected both actual and projected financial data, including annual revenues, net debts and market capitalizations, of the above-listed U.S. publicly traded peer companies, from global databases including Capital IQ and Bloomberg, to estimate the forward trading multiples in 2023 and 2025.

Legal Proceedings

• K Enter learned that three separate lawsuits were filed in or about December 2023, concerning First Virtual, its principal Sungkwon Kim and certain other parties (collectively referred to as the Prototype Lawsuits).

Related Party Transactions

• Ted Kim, the manager of the Sponsor and a co-founder and director of K Enter, owns 19,564 shares or 10.12% of the shares of common stock of K Enter based on the shares of K Enter to be issued and outstanding immediately prior to the closing of the Business Combination through his ownership and control of Global Fund LLC, which owns 12,000 shares, and Lodestar USA, Inc., which owns 7,564 shares.
• Further, Global Star officers and directors collectively own shares of common stock of K Enter representing approximately 8,537 shares or 4.3% of the outstanding shares of K Enter common stock based on the shares of K Enter to be issued and outstanding immediately prior to the closing of the Business Combination.
• Specifically, Stephen Drew owns 6,000 shares of K Enter common stock, Yang Kan Chong owns 1,337 shares of K Enter common stock, Jukka Rannila, beneficially through Assai OY, owns 600 shares of K Enter common stock.
• Nicholas Aaron Khoo, the Companys Chief Operating Officer, owns 600 shares of K Enter common stock, prior to the closing of the Business Combination.

Stakeholder Impact

• Global Stars public stockholders will experience dilution as a consequence of the issuance of PubCo Ordinary Shares as consideration in the Business Combination.
• Stockholders exercising their redemption rights will retain their Global Star warrants, which will automatically convert into PubCo Warrants.
• Stockholders exercising their redemption rights also will retain their public rights, each of which will automatically convert into one-tenth of a share of PubCo common stock upon the closing of the Business Combination.

Next Steps

• Global Star stockholders will vote on the proposed business combination at a special meeting on February 3, 2025.
• If approved, the business combination is expected to close as soon as practicable following the Special Meeting.

Key Dates

Keywords

Business Combination, Merger Agreement, K Enter, Global Star, Reincorporation, Acquisition, Stockholders, Redemption, PubCo, Warrants, Ordinary Shares