With tencent, HK Chinavision will buy China Entertainment Media for HK$2.02 Billion

ChinaVision Media Group Ltd., a Hong Kong-based producer of films and television programs, said it agreed to acquire a movie and television content producer, China Entertainment Media Group Ltd. from its chairman and others, for HK$2.02 billion ($259 million) in stock.

ChinaVision also plans to issue 619.4 million shares to a unit of Tencent Holdings Ltd., China’s biggest Internet company by revenue, at 40 Hong Kong cents each. Proceeds from the HK$247.8 million sale will be used for working capital, the company said. Tencent will get around 8 to 9% of the new group.

The major activities of ChinaVision are the development and distribution of entertainment (TV & Film) programs and games for mobile devices as well as advertising management for the Beijing Times morning newspaper.

CEMG: from film to TV advertising

China Entertainment Media Group (CEMG) was incorporated on 4 January 2011 after acquiring film and television producer Asian Union. According to the acquisition statement, the company said that CEMG’s film business has co-invested in two films with China Film Group which will be released before the end of this year. “[CEMG] and CFG have also tentatively agreed to co-invest in and co-produce two other Chinese history-themed mega productions, which are planned to complete in 2012 and 2013, and are scheduled for general release in theatres in 2013 and 2014, respectively.”

The company is also aiming to produce four to five “large- scale television dramas,” according to the filing. China Entertainment has entered into a long-term cooperation agreement with Gansu TV to exclusively operate the television advertising and content programming segments of the Gansu Satellite Television Network and Gansu Local Television Network. The cooperation agreement is for a term of 10 years. CEMG is also the Chinese partner of FremantleMedia for the production of documentary content. CEMG acquired the entire equity interest in Asian Union in early January 2011 from Mr. Liu who founded Asian Union in 2003.

According to the statement, “Asian Union is a well-recognised participant in the entertainment and media industry and has operating licenses to engage in film distribution, television drama series production, television entertainment programming production and stage performance production in the PRC. Since its incorporation, Asian Union has produced, invested in, and distributed over 20 television drama series, seven films and three documentary programmes. The films and television drama series that Asian Union has produced, invested in and/or distributed have earned numerous industry awards, including the “Critics Award” at the 55th annual Berlin Film Festival and the “Audience Award” at the 14th Busan International Film Festival. Since 2009, Asian Union has shifted its primary business activities from film production to the wholesale distribution of advertising inventory from numerous television networks in the PRC to third party advertising agents.”

“The target 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. ChinaVision and China Entertainment could utilize each other’s content delivery platforms and share resources and expenses to lift efficiency after the deal.”

Veteran Chinese film producer, Dong Ping, is the major shareholder of ChinaVision but also owns 35% of CEMG through a holding company. He is Chairman of both companies. Therefore the acquisition deal and the merger of the 2 groups won’t result in a change of control at ChinaVision neither China Entertainment.

Shareholding structure of the new company:

. Mr Dong                                                           23,28%

. Basic Charm (Mr Zhao)                                4,28%

. Mr Liu                                                                 1,04%

. Ding Shen                                                          0,1%

Subtotal for Existing ChinaVision major shareholders  28,7%

Other private investors                                                                16,32%

Other CEMG shareholders                                                            11,83%

Tencent                                                                                                   8%

Sequoia                                                                                               13,02%

Atlantis investment                                                                         2,84%

Public shareholders                                                                     19,29%

A TV, Film & new media Chinese giant

Even if the new combines group is quoted at HK stock exchange, it will become one of the major TV and film content producer and distributor in Mainland China, in competitition with Huayi Brothers,  and Huafeng. With the support of its new shareholder Tencent, ChinaVision could also become a new online content leader.

“ChinaVision also agreed to form a strategic partnership with Tencent Holdings to promote and distribute Chinavision’s movie, television and other contents on Tencent’s broad online platform”, it said in a statement late on Friday 21 October.

ChinaVision’s stock, which has been suspended since Sept. 20, will resume trading in Hong Kong on Oct. 24, the company said. The shares had dropped 34 percent this year, compared with the now 22 percent decline in the benchmark Hang Seng Index.

About ChinaVision Media Group Ltd

ChinaVision Media Group Limited (01060.HK) is an integrated cultural corporation with business focus on TV and film production, print media and mobile new media. The Group has built full range of business structure in China’s culture industry and established a series of film and TV companies such as Zhonglian Jinghua, specializing in film and TV production and distribution, art broker, and documentary distribution. Up to now, the group has been investing in and distributing plenty of outstanding films and TV episodes such as “Let the bullets fly”, “Lan”,” Jiandang Weiye “, “Underdog Knight II”, “My own swordsman”, “Dujia Pilu”, “Zhizhe Wudi” etc. ChinaVision and China Film Group build up strategic co-operation relationship.

In print media, the group ties the knot with People’s Daily to co-manage Beijing’s biggest morning newspaper-Beijing Times. Beijing Times enjoys a high of over 75% per cent morning post market shares, becoming the most popular newspaper among middle-aged readers. The digital entertainment new media is group’s important development direction. At present, the group makes the positive layout in mobile new media sector and propels the development and service for mobile new technology. The Group has become the first to bring live broadcast of the English Premier League (EPL) in Mainland China as it bagged the exclusive new media rights for three seasons. Millions of EPL fans could watch 380 splendid matches of all the season by mobile TV or portable TV. The group links up with People’s Daily Online to found a joint venture People Video to operate 3G mobile video. Tianjin Tangtu Technology, also a ChinaVision company, has launched a range of mobile online games, getting the enthusiastic pursuit among game players and cell phone users. Youline Technology, based on high-quality content product, comprises the products of mobile value-added services, mobile game, internet community. (company website)

. Acquisition and new shares issuing announcement (21/10/2011)

. Clarification announcement (23/10/2011)

SOURCES: ChinaVision Media Group, Bloomberg, Reuters (21/10/2011)

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