The state-run China Film Group plans $600-million IPO after years of delays
After years of delays and false starts, China Film Group — the giant, state-run company that handles the import of foreign movies to the mainland — said Wednesday it aims to raise more than $600 million in an initial public offering next week.
That would make the IPO the biggest ever for China’s entertainment industry.
China Film — which produces and distributes films and TV shows, and owns cinemas and studio facilities — said it plans to list on the Shanghai Stock Exchange and will sell up to 467 million shares. The proceeds will be used for investments in digital cinemas, producing films and TV shows as well as for paying down debt, the company said in its filings to the exchange. The share sale will see the state-run parent group’s ownership share reduced from 93% to 67%.
China Film is the sole importer of foreign films to the mainland and distributes them along with Huaxia, a smaller state-run entity. But in recent years, China Film has moved beyond simply importing Hollywood movies to co-producing or investing in foreign titles such as the 2010 Jaden Smith- and Jackie Chan-starring “Karate Kid,” Universal’s “Furious 7,” and “Warcraft” from Legendary Entertainment.
But it is reliant in no small part on Hollywood. More than a third of the company’s gross profits now come from distributing foreign films, China Film said in its filings with the Shanghai exchange.
In 2013, proceeds from importing foreign films made up 23% of the company’s gross profits, or about $39 million, but that rose to 37% of gross profits, or $98 million, last year..
“Jurassic World,” “X-Men: Days of Future Past” and “Transformers 4” are among the Hollywood blockbusters China Film has imported and distributed in recent years.
The company pointed out to prospective investors that any modifications to the current import system could negatively affect its earnings.
Though China’s economy has been slowing down, box office revenues have enjoyed double-digit growth for years thanks to rapid cinema construction, urbanization and rising disposable incomes.
Last year, box office sales reached $6.8 billion, up nearly 49% over 2014, according to the State Administration of Press, Publication, Radio, Film and Television. In 2009, China’s total box office revenue was $900 million.
Since then, China has added about 27,000 screens, bringing its total number to about 32,000 — but that’s still 7,000 fewer than in the U.S. and Canada. China has about four times the population of the United States.
The company noted in its filings that is profits have not grown as fast as China’s box office receipts in recent years, admitting that new players have “brought new funds to the industry and have performed excellently.”
Zhou Zhengbing, a professor at Beijing’s Central University of Finance and Economics, said although the government has given China Film an import monopoly and other special advantages, the company has increasingly struggled to be competitive.
“A lot of celebrities and talented people in the film business, they want to partner with private companies because those companies can offer them benefits like stock, or help them set up their own [production] entities,” Zhou said. Listing on the Shanghai exchange may be an effort to bring China Film more in line with its privately run competitors, he said.
China Film’s ambitions for an IPO date back more than 10 years, but Zhou noted that such a listing is a complex process for state-run entities. In addition, China last year suspended initial public offerings for months amid intense market volatility.
China’s entertainment companies are increasingly looking to go global. Legendary was purchased earlier this year by the Dalian Wanda Group, a major real estate developer that owns the mainland’s largest cinema chain as well as AMC Theaters.
Hollywood studios, meanwhile, have been looking eastward too and setting up Chinese outposts, such as DreamWorks Animation’s Shanghai-based Oriental DreamWorks joint venture and Warner Bros.’ recently established Flagship Entertainment.
Nicole Liu in The Times’ Beijing bureau contributed to this report.
Follow me on Twitter @JulieMakLAT.
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