HK studio buys theater circuit, Paramount distributor
Intercontinental is the Hong Kong sub-distributor for both Paramount and DreamWorks Animation.
The transaction sees eSun pay US$27.5 million (HK$213 million) for an 85% stake in Intercontinental.
ESun is buying out the entire 60% stake owned by Japanese publishing and cinema giant Kadokawa Holdings and a further 25% stake owned by LHL. Following the deal, LHL, a company representing Intercontinental’s founder Terry Lai and senior management, will retain a 15% holding.
ESun said that the acquisition will “add immediate scale to [eSun’s] cinema operations” and “also bolster its film and video distribution business in Hong Kong and Macau.”
Intercontinental operates five multiplex cinemas in Hong Kong under the MCL brand and it has a half share of The Grand Cinema, the territory’s largest movie theater. It also operates two complexes in Shenzhen, the mainland China mega-city just across the border from Hong Kong. The company is also involved in games and DVD distribution.
Intercontinental had a net asset value of US$23 million (HK$180 million) as of March this year and in the financial year to Dec 2012 made after tax profits of US$3.56 million (HK$27.6 million), compared with US$3.30 million (HK$25.6 million) in 2011.
Intercontinental became part of Kadokawa in Nov 2005, when its founders took the Hong Kong biz by surprise and sold a 60% majority stake to the Japanese firm. At the time, both Kadokawa and Intercontinental posited their collaboration as a means of expanding into South East Asia and into China. Intercontinental was then also the sub-distributor for Disney and Universal, though Universal has since switched allegiance to Intercontinental’s rival Edko, and Disney has since set up its own HK releasing unit.
The proposed acquisition comes at a difficult time for Hong Kong’s cinema operators. While theatrical box office is edging upwards after a period of steady decline, escalating property rentals mean that exhibitors’ operating costs are running far ahead. Two well-known cinemas have closed this year.
One of the possible logics behind the deal is that, as a significant property developer in Hong Kong and China, eSun may be able to cut better lease terms or take a longer view.
For Media Asia, which has recently consolidated the film, talent management and events promotion activities of eSun, the deal adds another tier of vertical integration. Media Asia/eSun is the last of Hong Kong’s major entertainment groups to add a Chinese exhibition component. Edko has extensive distribution and theater operations in China built up over a period of years. Emperor Motion Pictures recently pacted with UA Cinemas to launch a multiplex circuit in the mainland.
Media Asia, which as a producer was behind “Infernal Affairs” and its remake “The Departed,” has also recently undergone major upheaval. For much of the last decade it was controlled by Hong Kong tycoon Peter Lam (pictured right, with action star Donnie Yen). Last year Lam brought in Alibaba founder Jack Ma, his mainland Chinese Yunfeng fund, and Chinese digital giants Tencent and Sina as major strategic investors. He then re-floated Media Asia on the second tier of the Hong Kong Stock Exchange and installed a new CEO.
In a related transaction another Lam company, Lai Sun Garment (International), is to pay US$16.8 million (HK$130 million) for Kadokawa Intercontinental’s headquarters property in Hong Kong’s New Territories.