Golden Harvest sells its 40% stake in Golden Screen Cinemas

HONG KONG — Golden Harvest is selling the bulk of its movie exhibition interests in Malaysia in order to fund further hardtop expansion in mainland China.

Move, which was announced on the eve of CineAsia, Asia’s leading exhibitors’ convention, sees Golden Harvest sell its 40% stake in Golden Screen Cinemas to its joint venture partner PPB Leisure. Value of the transaction is pegged at HK$189 million ($24.3 million).

The GSC chain operates 18 sites and enjoys a near 50% market share, but growing competitive pressure held profits to a modest $2.06 million last year.

Golden Harvest said it will continue to work closely with PPB on distribution in Malaysia and that it has no plans to dispose of its 50-50 joint venture with the Tanjong Group in the smaller TGV circuit.

Golden Harvest, which has recently labored under substantial debts, said the substantial disposal will scarcely dent profits in the short term. It plans to use the capital for its drive into China.

“Given the gradual liberalization of the film distribution and exhibition markets on the mainland and the increase in investment opportunities, the directors believe it is an appropriate time for the group to ride this trend and redeploy the group’s resources to the China market,” the company said in a statement to the Hong Kong Stock Exchange.

In 2005 company opened its first multiplex in Shenzhen, one of China’s fastest-growing cities, and already has plans to expand the site and build at least one other plex nearby. It is examining possible sites in other major cities, including Beijing, Shanghai, Guangzhou and Hangzhou.

Golden Harvest’s expansion into China and the greater-than-expected return on investments it claims to be earning in Shenzhen stand in sharp contrast to the fortunes of Warner Bros. Intl. Cinemas, which last month said it would sell its Chinese hardtop interests.

WBIC said inflexible regulations that prevent a foreign corporation owning a majority stake in Chinese theaters had forced its withdrawal. In contrast, under the latest draft of Closer Economic Partnership Agreements, Hong Kong companies may own an unlimited number of mainland cinemas.

Chinese media this weekend reported the Shanghai Film Group is in talks to take over the shares it does not already own in the Paradise Warner Cinema in Shanghai’s Xujiahui district and another complex in Nanjing.

CineAsia runs from Tuesday through Thursday in Beijing.

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