Huayi to take 51% stake in Internet film company

Huayi Brothers Media Corp, one of China's leading private media and entertainment conglomerates, plans to acquire a 51 percent stake in Shenzhen Huayuxun Tech Co Ltd, an Internet movie service provider, for 266 million yuan ($42.7 million), the corporation announced on Monday.

The purchase is the latest move in Huayi Brothers' attempt to strengthen its Internet and mobile phone services. It bought 22 percent of Ourpalm Co Ltd in 2010 and 50.88 percent of Guangzhou Yin Han Technology Co Ltd.

Both companies are mobile value-added game developers.

The latest target, Shenzhen Huayuxun Tech Co Ltd, has the nation's largest online ticket reservation platform, which is called maizuo.com.

Its net assets stood at 5.12 million yuan as of Dec 31, 2013.

Last year, it posted a 7.3 million yuan loss.

But its top managers have vowed that in 2014, net profit will be at least 35.2 million yuan, with at least 80.96 million yuan in net profits for this year and next.

The company began operations in 2010. Its services now encompass online reservations, film ticket sales and movie information for personal computers, mobile terminals and online-to-offline platforms, covering 700 movie theaters in more than 80 Chinese cities.

Hu Ming, vice-president of Huayi Brothers, said that the purchase will give it a larger presence in Internet services.

"We will increase interaction with members and moviegoers on maizuo.com, through such activities as crowdfunding and fan networks," said Hu.

"The cooperation, if successful, will significantly enhance the profitability and distribution of movies," said Chen Yingkui, chief executive officer of Shenzhen Huayuxun.

Total box office revenues in China rose 27 percent last year to 21.7 billion yuan. The number of screens grew by almost 14 per day to 18,195 as of Dec 31, up nearly 40 percent year-on-year.

"Box office revenues will peak within three years. The room for profit growth generated by movie theater construction will be limited," said Chen Shaofeng, deputy director of the Institute for Cultural Industries at Peking University, "As a result, Huayi Brothers has to diversify its business. The acquisition shows its strategy to expand its capacity in the Internet sector through cross-media content."

At the 20th anniversary of the company, Wang Zhongjun, chief executive of Huayi Brothers, said that the company will divide its portfolios into three categories: the traditional sector of movie and TV drama production and agency work; entertainment facilities such as cultural cities and theme parks, and the Internet world online games, new media and fan networks.

"The purchase of Shenzhen Huayuxun marks an important step by Huayi Brothers into the Internet business," Chen said.

"Even though ticket reservations are a small platform, the services can be greatly diversified through interaction with the audience and fans, social networks and advertisements."