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Tencent Unit Buys New Classics Media for $2.25 Billion

China Literature, the publishing subsidiary of Chinese e-commerce giant Tencent, has bought control of leading Chinese film and TV producer New Classics Media for up to $2.25 billion (RMB15.45 billion). The price includes an earnings component, reflecting profits to 2020.

New Classics Media has produced films “Never Say Die” and “Legend of the Demon Cat” and TV series “The First Half of My Life” and “Tiger Mom.”

The news was announced in a regulatory filing to the Hong Kong stock market, where China Literature is listed.

Tencent says the acquisition of such a major TV production house will help it unlock the potential of its vast literary library. It notes that a third of the top 50 movies and a quarter of the top TV series in China are literary adaptations. The figure rises to more than 50% for web series.

Integrating New Classics Media will allow Tencent “to adapt more high-quality literary content into popular television series, web series and films leveraging [New Classics Media’s] proven track record of script development and production across multiple literary genres,” China Literature said in the filing. “The prevalence of mobile Internet has propelled large Internet platforms to seek additional content offerings in order to capture a greater proportion of the fragmented user time of Chinese Internet users. The video portal has become the premier destination for audio-visual entertainment to Chinese consumers.”

Tencent, which stretches from games to social media, also operates Tencent Video, one of China’s top three generalist video-streaming platforms.

Earlier this year Tencent bought a 27% stake in New Classics Media from Enlight Media. The new transaction gives China Literature outright control. New Classics had until earlier this year itself considered an IPO and share listing.

The filing shows New Classics Media made net profits of RMB161 million in 2016, and more than doubled that to RMB376 million in 2017.

Both New Classics Media and Tencent Video were last week among the nine major TV producers to sign an industry agreement capping the salaries of stars in its TV series.

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