Huayi currently has a 12% stake in the Hong Kong-based business. That will increase to 79% after it buys out stakes currently held by private equity funds Carlyle Asia Growth Partners IV LP, Yunfeng Investment GP, and another shareholder Mighty Capital.
Huayi will buy the stake through its Huayi International subsidiary, and pay in a mix of cash and shares. Some $67 million will be funded through a share issue, while the remainder is an earn out linked to profits in the next two financial years.
The deal sets a target of net profits of $17 million for the next two years and values the business at $125 million, using a 7.35 multiple of target profits.
Founded by Dr Chong Man Nang in 1999, GDC was for several years a pioneer of digital cinema systems and built up a client base largely in Asia and the Americas. It moved into profit with the booming 3-D and digital conversions for the past five years.
Along the way it has attracted several interesting shareholders. These included Li Ka-shing, the Hong Kong-based retail, ports and telecoms billionaire who is Asia’s richest man, and Yunfeng, a fund associated with Alibaba founder Jack Ma.
At the time that Carlyle and Yunfeng led a buyout of 80% of the business in Oct. 2011, GDC claimed to have the world’s second largest installed server market. These included 4,500 servers in China, then representing 54% of the mainland Chinese market.
Huayi has operations that stretch from film and TV production and distribution, through to fashion, theme parks and cinema operation. Earlier this week it announced that it will invest up to $130 million in a new U.S. film and TV subsidiary.