Copper company turns to Hollywood for profit

A Chinese metal manufacturer has acquired a majority stake in a Hollywood film production company.

It is the latest of a series of moves by Chinese industrial firms seeking to diversify from loss-making businesses amid the economic slowdown.

Xinke New Materials Co Ltd, a copper processor based in Anhui province, says it will acquire an 80 percent stake in Midnight Investments LP, owner of Hollywood production studio Voltage Pictures for 2.39 billion yuan ($350 million; 327.2 million euros; 282 million), according to its filing to the Shanghai Stock Exchange published on Nov 13.

The US filmmaker produced movies including the award-winning The Hurt Locker and Dallas Buyers' Club.

Xinke's move follows Chinese property developer Dalian Wanda Group's $1 billion purchase a week previously of Hollywood television company Dick Clark Productions, which produces the Golden Globe and Billboard Music awards.

Industry analysts say the deal highlights the trend in China where industrial companies are stepping up efforts to diversify their business from loss-making sectors through investment in more promising business, such as the entertainment industry.

"There is certainly a trend here as companies in loss-making industries are looking for opportunities in sectors with high growth potential. Entertainment is one of them," says Xiao Han, a partner at Chinese entertainment research company EntGroup Inc.

Xinke said in its filing that the deal, which will be a cash transaction, would help boost its profitability and strengthen its position in the domestic and international film business.

The company reported a loss of 79.8 million yuan in the third quarter while Midnight Investments reported total net profit of $118 million in the first half of this year.

An anonymous banker who advised Xinke on the deal was quoted by the Financial Times as saying that the company was "aiming at strategic transformation through the acquisition".

Xinke has already entered the Chinese entertainment business by purchasing domestic TV production firm Kingswood Culture for 1.2 billion yuan in 2014.

Some industry analysts fear the deal could face regulatory hurdles as the Chinese securities regulator has tightened supervision of listed companies acquiring assets in industries not related to their core activities.

But Xiao from EntGroup Inc says the regulator's intention is to curb illegal operation and speculation in the M&A market.

lixiang@chinadaily.com.cn

(China Daily European Weekly 11/18/2016 page27)