Animation studio taps equity markets to raise working capital Imagi International Holdings, a computer-generated feature animation studio listed on the main board, is betting on new equity infusion and the expected box-office bonanza from its first Hollywood-backed movie to propel its production of blockbuster Asian animated superhero movies. Imagi plans to increase animation work on films based on Japanese anime franchises Science Ninja Team Gatchaman and Astro Boy, as it prepares for the global release on March 23 of its US$30 million debut CG-animated movie - Teenage Mutant Ninja Turtles. The company, with about 450 animators in its Wan Chai headquarters and various creative talents in Los Angeles, last month sought to raise equity of up to HK$370 million by selling 100 million new shares, with an indicative price range of between HK$3.50 and HK$3.70. Brokerage and investment bank CLSA is the sole bookrunner of the sale. 'We chose to go to the equity market to raise funds to finance our new films, Gatchaman and Astro Boy,' said Douglas Glen, co-chief executive and executive director at Imagi. 'By being able to begin development of our motion pictures with all the financing we need to complete them, Imagi can approach potential distributors from the same position of strength as DreamWorks Animation or Lucasfilm.' For the worldwide distribution of the first full three-dimensional, CG-animated Ninja Turtles movie, Imagi has partnered with Hollywood players Warner Bros and the Weinstein Co. 'In 1990, the first live-action Ninja Turtles movie did US$134 million in the United States box office,' Mr Glen said. 'That would be worth almost US$210 million in constant dollars in 2007. So we simply equal that and we have a large success in our hand.' He said the trailer of the new Ninja Turtles CG-animated movie had drawn enthusiastic responses in film markets where it was shown. The distributors have ensured the movie will be seen in more than 10,000 screens worldwide. Imagi adopted a 'pre-sale' business model: it sells the distribution right of its film to a distributor, which in turn offers it a minimum guarantee on the film's completion and delivery, according to a report by Taifook Research. The remaining box office, DVD and television revenue pool is split between Imagi and the distributor, after deducting relevant costs, distributor's fees and the minimum guarantee. 'The model limits Imagi's downside risk, as the minimum guarantee largely covers the production cost of the film and allows it to capture the earnings upside of the CG-animated feature,' the Taifook report said. Renewed interest in the Ninja Turtles came after the successful US and British release in 2003 of a new series of 2D-animated television programmes. That relaunch generated hundreds of million of US dollars worth of retail sales of new licensed Ninja Turtles merchandise, including a range from Hong Kong-listed Playmates Holdings. That opportunity prompted a radical change at Imagi, formerly Boto International Holdings, the world's largest manufacturer of artificial Christmas trees. Those decorative and leisure furniture businesses were sold in 2002, so the company could transform into a world-class CG-animated feature production house. Its market capitalisation as of January 3 this year is HK$4.26 billion. Mr Glen said Imagi was not competing with animation studios in South Korea, Japan or Guangzhou. The firm also does not see itself as a rival of the young children-oriented CG cartoon movies from Pixar, part of the Walt Disney Group. 'We're making films for global audiences, especially the eight to 18-year-old demographic of mainly boys who spend more time playing video games than watching television,' Mr Glen said. 'Our competitors are the major Hollywood studios which make the big-budget, live-action superhero films, such as Spider-Man, Batman, Superman and X-Men.' He said Imagi had a significant cost advantage against those rivals because the CG-animation work is done in Hong Kong. The company's Ninja Turtles movie, for example, was produced for 50 per cent less cost than a typical North American CG-animation film. Imagi has focused on making CG movies based on popular franchises: Ninja Turtles from the Mirage Group, Gatchaman from Tatsunoko Production and Astro Boy from Tezuka Productions. 'If you check the results of the top films which made up 25 per cent of the total global box office last year, you'll find four CG-animated pictures, two superhero movies, and five sequels,' Mr Glen said. 'Our strategy covers all three: we're in CG animation, focused on superheroes and into sequels.'