Metal man­u­fac­turer buys ma­jor­ity stake in Hol­ly­wood per­cent

China Daily (Canada) - - ACROSS AMERICAS - By LI XIANG in Bei­jing

A Chi­nese metal man­u­fac­turer has an­nounced the ac­qui­si­tion of a ma­jor­ity stake in a Hol­ly­wood film pro­duc­tion com­pany, the lat­est move of Chi­nese in­dus­trial firms seek­ing to di­ver­sity from loss­mak­ing busi­nesses amid the eco­nomic slow­down.

Xinke New Materials Co Ltd, a cop­per pro­ces­sor based in An­hui prov­ince, said it will ac­quire 80 per­cent of stake in Mid­night In­vest­ments LP, the owner of Hol­ly­wood pro­duc­tion stu­dio Volt­age Pic­tures, for 2.39 bil­lion yuan ($350 mil­lion), ac­cord­ing to its fil­ing to the Shang­hai Stock Ex­change pub­lished on Sun­day.

The US film­maker pro­duced movies in­clud­ing the award-win­ning Hurt Locker and Dal­las Buy­ers’ Club.

Xinke’s move fol­lowed Chi­nese prop­erty de­vel­oper Dalian Wanda Group’s $1 bil­lion pur­chase last week of Hol­ly­wood tele­vi­sion com­pany Dick Clark Pro­duc­tions which pro­duces the Golden Globe and Bill­board Mu­sic awards.

In­dus­try an­a­lysts said the deal high­lighted the trend in China where in­dus­trial com­pa­nies are step­ping up ef­forts to di­ver­sity their busi­ness from loss-mak­ing sec­tors through in­vest­ment in more promis­ing busi­ness such as the en­ter­tain­ment in­dus­try.

“There is cer­tainly a trend here as com­pa­nies in loss­mak­ing in­dus­tries are look­ing for op­por­tu­ni­ties in sec­tors with high growth po­ten­tial. En­ter­tain­ment is one of them,” said Xiao Han, a part­ner at Chi­nese en­ter­tain­ment re­search com­pany En­tGroup Inc.

Xinke said in its fil­ing that the deal, which will be a cash trans­ac­tion, will help boost its prof­itabil­ity and strengthen its po­si­tion in the do­mes­tic and in­ter­na­tional film busi­ness.

The com­pany re­ported a loss of 79.8 mil­lion yuan in the third quar­ter while the US firm Mid­night In­vest­ments re­ported to­tal net profit of $118 mil­lion in the first half of this year.

An anony­mous banker who ad­vised Xinke on the deal was quoted by the Fi­nan­cial Times as say­ing that the com­pany was “aim­ing at strate­gic trans­for­ma­tion through the ac­qui­si­tion”.

Xinke al­ready en­tered the Chi­nese en­ter­tain­ment busi­ness by pur­chas­ing do­mes­tic TV pro­duc­tion firm Kingswood Cul­ture for 1.2 bil­lion yuan in 2014.

Some in­dus­try an­a­lysts fear that the deal by Xinke could face reg­u­la­tory hur­dles as the Chi­nese se­cu­ri­ties reg­u­la­tor has tight­ened su­per­vi­sion of listed com­pa­nies ac­quir­ing as­sets in in­dus­tries not re­lated to their core ac­tiv­i­ties.

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