ChinaVision to pay HK$2b for China Entertainment
Hong Kong-listed ChinaVision Media Group will acquire China Entertainment Media Group for HK$2.02 billion, the company said in a filing to the Hong Kong stock exchange.
ChinaVision, a content producer and distributer for television, cinema and mobile devices on the mainland, plans to issue 5 billion new shares to fund the acquisition.
The share offering represents 242 per cent of its existing issued share capital. The firm will also issue 619.4 million new shares, at 40 Hong Kong cents each, to a unit of Tencent Holdings, the mainland's largest internet firm in terms of market value.
The issue price is a premium of 8.7 per cent to the stock's average closing price for the past 30 trading days.
The plan has to be approved by existing shareholders, and the company has proposed a special general meeting 'as soon as practicable'.
Dong Ping, chairman of ChinaVision, said Tencent's participation would boost shareholder confidence, and that they were likely to vote in favour of the share offering even though their holdings would be diluted. 'The strategic investment of Tencent shows their recognition of our value,' Dong said.
Tencent's internet platform would help market ChinaVision's media content, while ChinaVision would provide quality content to Tencent's internet users.
'Tencent's online platform - for instance, Tencent Microblog, QQ.com, Qzone and its video platform - will distribute our films, TV dramas and mobile entertainment content,' said Dong.
Tencent's stake in ChinaVision would be worth HK$247.8 million, and ChinaVision said it would use the proceeds as working capital.
China Entertainment, a producer of films, TV and satellite TV programmes, will boost ChinaVision's market presence, whose competitive edge is in the area of distribution.
ChinaVision posted a HK$86 million loss in the first half of this year.
Dong declined to give a forecast of the firm's full-year performance, but he said the second half 'should be not bad'. He said the acquisition of China Entertainment would bolster ChinaVision's future development.
'The target (China Entertainment) conducts its principal business of producing and distributing films and television and satellite television programs through the employment of a seasoned management team with over 10 years of experience in the industry,' ChinaVision said in the filing. 'This complements the company's business.'
China Entertainment works in partnership with China Film Group Corporation, and it has a 10-year co-operation agreement with the Gansu Provincial Film and TV Broadcast Group to exclusively operate the TV advertising and content programming of Gansu Satellite Television Network and the province's local TV network.
According to the filing, China Entertainment aims to produce four to six movies a year, and four to five 'large-scale television dramas'.
ChinaVision shares will resume trading today, after being suspended since September 20.