image

IPO

IPO

Tencent-backed Hollywood studio STX Entertainment eyes Hong Kong IPO

Studio, whose investors also include PCCW and Hony Capital, says Hong Kong is its No 1 choice for a listing

PUBLISHED : Monday, 21 November, 2016, 4:00pm
UPDATED : Monday, 21 November, 2016, 11:02pm

STX Entertainment, a Hollywood start-up studio backed by Chinese investors, is eyeing an initial public offering in Hong Kong as it aims to become a bridge between the US and China, the world’s biggest movie markets.

Chairman and CEO Robert Simonds told the Post that STX is finalising plans to set up a Hong Kong office, and the city is its favoured option for a listing venue.

He did not disclose the fundraising target and timeline for the offering, but said there is unlikely to be another round of financing activity before going public. In the last round of fundraising, in August, Chinese technology giant Tencent and Hong Kong telecoms company PCCW bought equity stakes in the Los Angeles-based studio, joining existing investors including Hony Capital, the private equity arm of Legend Holdings.

“The business itself is sustaining, and the last round of financing gave us the capital we needed to expand all the other businesses besides movies,” Simonds said.

John Zhao, chief executive officer of Hony Capital, said the market value of STX had jumped six to seven times since Hony invested two years ago.

Founded in 2014 by Hollywood veterans Simonds and Bill McGlashan, STX has released films including the summer hit “Bad Moms” and the 2015 thriller “The Gift”.

“The studio spent between US$600 million and US$1 billion this year on the movie business, and plans to expend at least that amount or more in the sector next year, which should make up approximately one half of the budget. The rest of the estimated budget is expected to come from the TV, streaming and virtual reality sectors,” Simonds said.

STX plans to cooperate with Tencent to develop the television and streaming business, and to leverage its partnership with PCCW to expand into India’s TV market.

There has been a flurry of deals involving Chinese firms buying US movie studios, including Dalian Wanda Group’s US$3.5 billion acquisition of Legendary Entertainment, which developed Jurassic World, and Fosun International’s investment in Studio 8.

Simonds said: “Wanda’s purchase is a very smart deal. We are also making money for our partners. But I am convinced that a lot of other US-China transactions are not going to end up well for Chinese partners in terms of financial return, although some investors didn’t invest for financial reasons.”

I am convinced that a lot of other US-China transactions are not going to end up well for Chinese partners in terms of financial return
Robert Simonds, CEO, STX Entertainment

STX is the only Hollywood studio with distribution ability backed by Chinese capital, Simonds said.

He expects this to give the company an edge in bringing Chinese story telling to overseas markets - something industry peers have not achieved to any significant degree so far.

Starting from a clean slate has made distribution much more cost-efficient for STX, compared with the so-called big six studios - Twentieth Century Fox, Warner Brothers, Walt Disney, Universal Pictures, Columbia and Paramount Pictures.

“The effect of using 80 staff for distribution is the same for the big six using 800 staff,” Simonds said.

“The Foreigner”, Jackie Chan’s upcoming movie distributed and produced by STX, had received good feedback from a recent preview, Simonds said. He sees it as an example of telling a Chinese story in a way that appeals to a global audience.

The studio’s first trial in mainland China will be working with Hunan TV in Hunan province to develop the reality show “Number One Surprise”. STX owns the rights to distribute the Chinese format to overseas markets.

business-article-page