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Legendary East Finds Key Partner in China Film Co.

China Film Group's backing means Thomas Tull can move forward with making movies through Legendary East

Legendary Pictures’ Chinese venture Legendary East has been looking for a partner to produce a slate of tentpole titles in China since parting ways with distributor Huayi Brothers in January 2012. It’s now found a key one: China Film Co.

In a multi-year deal, the companies will co-produce movies that are designed for the Chinese and global markets. The pact is significant because China Film Co. is the largest producer and distributor of movies in China, and is owned by the China Film Group, a state-owned corporation whose tentacles extend into every area of the film biz, from production to distribution, to importing foreign films and exhibition.

The agreement, announced Thursday from Beijing, also marks the first time China Film Co. has inked a long-term, multi-picture production deal with a Chinese or international partner. Deal also calls for the two companies to fund the development and production of multiple pictures over an initial three-year term.

Legendary East has yet to disclose which titles would get the greenlight first, but the company has for years been developing “The Great Wall,” an historic action fantasy that once had Henry Cavill attached.

The Great Wall,” set in 15th century China, revolves around British warriors who happen upon the construction of the massive wall, and learn that the hurried construction of the wall isn’t just to keep out the Mongols, but something else more inhuman and dangerous. Film was never greenlit.

When Legendary East split with Huayi Brothers, the move was seen as a way to make it easier to find investors for Legendary East’s fundraising efforts, according to sources with knowledge of the discussions.

At the time, Paul Y. Engineering Group of Hong Kong had put its proposed $220.5 million investment in Legendary East on hold due to shaky financial markets.

Investors also balked at the size of the Huayi Brothers’ planned stake in Legendary East. Under the original proposal, PYE planned to take a 50% stake in Legendary East. Thomas Tull’s Legendary Pictures would have a 40% stake in Legendary East and the Huayi Brothers would take the remaining 10%.

But the Huayi Brothers’ share proved too large for some financiers to swallow, according to sources with knowledge of the discussions, and contributed to Legendary East’s decision to let lapse its self-imposed deal deadline of Dec. 31, 2011. Legendary East had imposed an arbitrary deadline, and its relationship with Huayi Brothers dissolved when that deadline passed.

Several U.S. companies including Legendary and Relativity are working hard to get a toehold in the massive Chinese market, but the tough financial climate is making some deals harder to finalize, as are establishing relationships with state-run organizations there. Many from Hollywood have called it the Wild East.

To help navigate the territory, Tull tapped Peter Loehr, former topper of Beijing’s CAA office and one of the best-established foreign figures in the Chinese biz, to become CEO of Legendary East, in May 2012. Loehr, who was a producer in Beijing before setting up CAA’s office in 2005, works from the Chinese capital. Loehr was key in negotiating the deal with China Film Co.

The deal with China Film Co. now enables Legendary Entertainment’s Thomas Tull to move forward with plans to produce films in China — something he’s been looking to do since launching Legendary East in June 2011, when he paired up with Chinese-born Hong Kong media and finance entrepreneur Kelvin Wu.

The reason: To capitalize on China’s rapidly growing theatrical biz, which is now the top theatrical market outside of North America, generating an estimated $2.7 billion in ticket sales in 2012, according to the Motion Picture Association of America.

But in order to play films in the region and collect more of their box office there, producers need the backing of a Chinese distributor with clout. China Film Co. certainly provides that to Tull.

It has the money, it owns the facilities, it reps most of the talent, and it has a big say in deciding what movies get made in China, either as stand-alone pics or as co-productions, and operates seven circuits with 400 theaters, which constitute about half the country’s total B.O. Group was formed in 1999 after the State Council merged several state-owned film companies, including Beijing Film Studio and China Film Equipment Corp., into one entity.

“We truly value the opportunity to work with China Film Co., a leader in the vital Chinese motion picture marketplace,” Tull said. “We look forward to combining our very complementary strengths to serve the global entertainment market.”

When Legendary East first formed, it hoped to make one or two big-budget pics a year, beginning in 2012, that would have commercial appeal both in China and around the globe. Company would accomplish this in part by producing mainly English-language pics that feature themes based on Chinese history, mythology or culture.

“Partnering with China Film Co., Ltd. allows us to collaborate on projects from the earliest stages, and create true co-productions with unique worlds, elements and stories that universally speak to audiences,” said Legendary East CEO Peter Loehr.

“We are very much looking forward to working with Legendary East and are impressed by their strong achievements to date,” said Han Sanping, Chairman of China Film Co. “There can be no doubt that this is one of the most important collaborations for CFGC in the coming years. We believe that through strong collaboration between CFGC and Legendary East, we will be able to make films that are more appealing to filmgoers, creating new genres that, through the magic of film, bring greater variety to audiences around the world.”

(Rachel Abrams and Clifford Coonan contributed to this report).

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