Sanpower launching fund to buy cinemas

Chinese conglomerate Sanpower Group is launching a fund with a 3 billion yuan ($435 million) target that will be used to acquire up to 150 domestic cinemas in a bet on rapid growth in the country's movie market, two sources with direct knowledge of the matter said.

Sanpower is in talks with several domestic institutional investors, including banks and investment funds, for contributions. The privately-owned conglomerate itself will commit 20 percent to 30 percent of the fund's capital, they said, adding that it is expected to close in the second half of 2017.

The Nanjing-based group, founded by its billionaire chairman Yuan Yafei in 1993, shot into international prominence in 2014 after buying Britain's high-street retailer House of Fraser. It has spent about $4.2 billion on domestic and outbound acquisitions over the past two years.

Sanpower's maiden entertainment industry buyout fund will enable it to raise external private capital to support its acquisition spree without dipping into its own balance sheet or seeking debt-funding.

The fundraising comes as Sanpower is seeking to diversify from a focus on property, retail and healthcare and tap into cinema-crazy China, which is poised to become the world's largest movie market by box-office revenue in the next few years, overtaking the United States.

But after a surge in recent years, the growth rate of China's movie market is cooling, with total ticket sales rising just 3.7 percent in 2016 to 45.7 billion yuan amid a crackdown on box-office fraud, after a 49 percent jump in 2015.

Sanpower, which is already building about 10 cinemas that will open in 2017 and 2018 in a few tier-two cities like Nanjing, aims to buy between 120 to 150 cinemas across China over the next three years, the sources said.

Reuters