China’s Recon Abandons Millennium Takeover Deal

Chinese media investment firm Recon Holdings says that it has dropped its bid to acquire a controlling stake in Avi Lerner’s Millennium Films. Recon said that certain conditions had not been fulfilled by the Aug 31 deadline.

The $100 million deal for 51% of Millennium was announced in February, by Recon a sprawling conglomerate that also owns the English soccer club Aston Villa. The deal announced covered Millennium’s library and gave Recon the option to buy out the outstanding 49% of Millennium shares at a later date.

In a regulatory filing made on Thursday, Recon said that the ending of the deal had been a mutual decision and that they two may continue to seek a strategic cooperation. Despite the friendly words, there are strong reasons to suspect that the deal is yet another casualty of the tightening regulatory environment in China. Other deals to collapse under increasing Chinese scrutiny include Wanda’s bid to buy Dick Clark Productions and Xinke’s attempt to buy Voltage Entertainment.

After several months of creeping regulatory action against “exuberant” and “irrational” dealmaking, the Chinese government this month spelled out clearly new controls for foreign investments by Chinese companies. Restricted categories include acquisitions in sectors including film, entertainment, sports clubs and hotels.