A copper processing company has announced one of the more unlikely diversifications by Chinese companies into the US entertainment sector, taking an 80 per cent stake in the Hollywood film production company that made The Hurt Locker movie.
On Monday (11/14), Xinke New Materials, based in China’s southern Anhui Province where it smelts and processes copper, disclosed the majority stake in the parent company of Oscar-winning Voltage Pictures.
The deal follows a $1bn takeover last week by China’s biggest real estate company Dalian Wanda of Dick Clark Productions, which runs the Golden Globe awards and Miss America pageants.
In January, Wanda bought Legendary Entertainment, co-producer of film hits such as Jurassic World. Wanda also controls US cinema operator AMC Entertainment.
While Xinke has little previous connection to the world of global entertainment, analysts said the deal was part of a broader trend by Chinese heavy industry to diversify into higher return sectors, such as media, amid China’s economic slowdown.
“Xinke’s main business in the copper industry is a ‘sunset industry’ whereas the movie and TV entertainment industry is a very hot industry in China,” said Xiao Han, partner at EntGroup Capital Management in Beijing.
The smelter has recently acquired a television company — Kingswood Culture — in the city of Xi’an, and has begun making its own TV series, as well as football-themed movies, he said.
Xinke said in a filing on the Shanghai Stock Exchange that earlier this year it had set up an international media investment arm named Wotaiji International Media, based in Hong Kong, which will be in charge of the Voltage stake.
The company will pay US-based Leone Holdings and Minuit Holdings between $345m and $518m for 80 per cent of Midnight Investments, which owns Voltage. The deal is expected to close by the end of December. Voltage could not be reached for comment.
Xinke also could not be reached, but said in its filing that the acquisition would enable it to strengthen its position in the domestic and international film business, and would significantly boost its profitability.
A banking adviser to Xinke, who asked not to be named, confirmed the company “is aiming at strategic transformation through the acquisition”.
Mr Xiao said buying an international media company makes sense, as most high quality domestic media assets had long since been snapped up. “Xinke can use the overseas professional team and expertise to produce good-quality works and find a competitive edge in the domestic market,” he said.
In turn, many Hollywood studios see having connections in China as a means to access the huge domestic market there.
By Courtesy of FT