Huayi's star brightens with marquee investors

Media group could climb to new heights with resources of big-name backers

Huayi Brothers Media Group made news recently with an announcement that it would raise 3.6 billion yuan ($588 million) from a private placement deal with a group of investors that includes Ping An Insurance (Group)'s asset management unit, social media and online portal operator Tencent as well as a firm controlled by Alibaba founder Jack Ma Yun.

According to reports, this deal will see Ma's firm and Tencent each claim 8.08 percent stakes in Huayi, making them the second-largest stakeholders in the media conglomerate after senior executive Wang Zhongjun. Previously, Ma's firm and Tencent held 4.03 percent and 4.86 percent stakes respectively in the company. Meanwhile, Ping An's assets management unit will become Huayi's third-largest shareholder, with 1.98 percent of shares.

Many in the market have high hopes for an alliance between Chinese media behemoth Huayi and a cohort of the country's largest online and financial services companies. Indeed, Huayi's stock price jumped by the 10-percent daily limit Wednesday, the day after news of the placement was made public.

As things stand now, investors have every reason to cheer this latest round of fundraising. Not only will Huayi receive a hefty dose of fresh capital, the resources of its top stakeholders could provide ample support for its business development plans at home and abroad.

Alibaba, with its hundreds of millions of registered users, may open new doors when it comes to the sale and consumption of Huayi's films and television shows. What's more, Alibaba and Huayi plan to jointly produce and distribute five films over the coming three years, reports say, with 5 to 10 percent of the budget for these movies to be supplied by the e-commerce giant.

The prospective benefits to be gained from Tencent are no less significant. As one of China's top online portal operators and game developers, Tencent can turn popular Huayi properties into games and other online media. Over recent years, Huayi has already invested heavily in China's gaming industry, with the company in 2010 spending 149 million yuan for a 22 percent stake in Ourpalm Co Ltd and 670 million yuan for a 50.88 share in Yinhan Games in 2013, two local game studios.

Meanwhile, Huayi can also benefit from stronger ties with Ping An, one of China's biggest and most respected financial service companies. Such connections could improve Huayi's ability to raise funds in the future. Ping An's expertise could also benefit Huayi's plans to acquire overseas assets.

By cementing ties with several of China's largest and most successful businesses, Huayi could eventually develop into a diversified entertainment giant on par with the likes of Walt Disney Co. Of course, attaining such a lofty goal won't be easy. Huayi and its new investment partners will have to work together to avoid the sorts of conflicts which can easily occur when investors enter an unfamiliar field. Huayi's stakeholders must realize that the entertainment industry is fraught with unique risks. Shifting public tastes and mistaken creative choices, for example, can cause even the most expensive film production to tank at the box office.

If such pitfalls can be overcome, Huayi could develop into one of the world's largest entertainment empires with the help of its investors' e-commerce, social networking, gaming and financial service resources. Looking ahead, achieving synergy will be key as Huayi and its backers take aim at meeting market demands.