The rationality of the valuation of film and television mergers and acquisitions is still the criterion for judgment

Huanrui Century finally ended its five-year long-distance running and was successfully acquired by Xingmei. Analysts believe that it is not difficult to see from the successful reorganization of Xingmei that the regulatory authorities adhere to the principle of "one discussion on one issue" when it comes to mergers and acquisitions in the film and television industry and do not apply one size fits all to the industry.

Editor's note: Inthe film and television media industry, where "storytelling" is the most popular, now every story you tell has to be considered carefully. It's not that stories cannot be told, but that stories cannot be told too much, otherwise "too much is not enough". It is not difficult to see from the various new regulations promulgated recently that the change in regulatory trends not only points to the A-share market, but also does not let go of the New Third Board market with lower thresholds.

Huanrui Century finally ended its five-year long-distance running and was successfully acquired by Xingmei. Li Yifeng, Jia Nailiang, Sun Yaoqi, He Shengming and others once again staged the myth of star shareholders "getting rich overnight".

However, the issue of general concern to the industry is that after the merger and acquisition of Storm Group was rejected, the regulatory level publicly spoke out, pointing to the film and television merger bubble and star securitization.

Analysts believe that it is not difficult to see from the successful reorganization of Xingmei that the regulatory authorities adhere to the principle of "one discussion on one issue" when it comes to mergers and acquisitions in the film and television industry, and do not apply one size fits all to the industry.

On

the evening of July 21, Xingmei Joint issued an announcement stating that it had received a notice from the China Securities Regulatory Commission and reviewed the 48th M & A Committee in 2016 convened by the M & A Review Committee of Listed Companies of the China Securities Regulatory Commission on the same day. The company issued shares to purchase assets and raised supporting funds and related transactions were conditionally approved.

The next day, Xingmei United resumed trading, and the company's share price rose to a daily limit, closing at 15.81 yuan/share.

According to Xingmei's joint reorganization plan, the company plans to purchase 100% equity of Huanrui Century by approximately 392 million shares from all shareholders of Huanrui Century such as Chen Yuan and Zhong Junyan at a price of 7.66 yuan/share. The estimated value of the underlying assets is 3 billion yuan; At the same time, the non-public issuance of approximately 175 million shares of shares from Huanrui United, Hongdao Tianhua, Qingyou Qianhe, and Qingyou Ruihe at a price of 8.72 yuan/share to raise matching funds of no more than 1.53 billion yuan to be used for Huanrui Century TV series and film investment, special effects post-production center and supplementary working capital.

During the transaction, Chen Yuan and Zhong Junyan injected Huanrui Century, which they controlled, into the listed company. The transaction price of Huanrui Century was 3 billion yuan, accounting for more than 100% of the listed company's total assets of 3.0837 million yuan at the end of 2014, constituting a major asset reorganization.

Like other film and television companies, the focus of the successful reorganization of Stellar United focused on "star shareholders". Data shows that in addition to founders Chen Yuan and Zhong Junyan, the company's shareholders also include Li Yifeng, Jia Nailiang, Sun Yaoqi, He Shengming, Du Chun and others. Among them, Li Yifeng, Jia Nailiang and Sun Yaoqi all hold 200,000 shares, accounting for 0.19% each; He Shengming holds 1 million shares, accounting for 0.93%; Du Chun holds 400,000 shares, accounting for 0.37%.

As early as October 2011, the registered capital of Huanrui Century increased from 50 million yuan to 80 million yuan. For the first time, new shareholders were introduced in the name of equity incentives. The company's contracted artists He Shengming, Du Chun, and Yang Mi participated in the subscription. The price was only 1.2 yuan/share, of which 1 million shares of He Shengming and 400,000 shares of Du Chun have been held to this day, with a value increase of more than 23 times. Yang Mi left halfway and missed the opportunity of "getting rich" perfectly.

The rationality of the valuation of film and television mergers and acquisitions is still the criterion for judgment.

In fact, the successful reorganization of Xingmei has also given listed companies in the film and television industry a "ray of light". Previously, Storm Group's plan to acquire Scarecrow Pictures had just been rejected, and the reason for the denial was also interpreted by the outside world as: film and television supervision was becoming stricter.

In fact, a series of actions by the Shenzhen Stock Exchange also pointed to the M & A bubble in the film and television industry. On July 15, the Shenzhen Stock Exchange issued the "Shenzhen Stock Exchange GEM Industry Information Disclosure Guidelines No. 1-Listed Companies Engaging in Radio, Film and Television Business (Revised in 2016)", establishing rules for film and television companies to disclose information.

In this regard, Zhao Huan, chief analyst of Fortune Securities, once said that the Shenzhen Stock Exchange's refinement of information disclosure requirements for film and television companies will help stabilize conceptual hype in film and television projects, promote the standardized development of China's film market, reduce the equity financing costs of listed companies, and focus on the development of the main business, which plays a positive role in promoting the stability and development of the market.

However, people in the industry generally believe that regulation has burst the bubble of film and television companies, the star stock market's path of "starting prices" has been blocked, and the industry has encountered a capital winter.

However, the successful reorganization of Xingmei has also created a group of star shareholders, which has puzzled many industry practitioners. What is the attitude of the regulatory authorities towards the reorganization of the film and television industry? Does this incident mean that the policy is open?

In this regard, Shen Meng, executive director of Xiangsong Capital, believes that the Xingmei Joint Meeting fully demonstrated that the regulatory level adheres to the principle of "one discussion on one issue" and does not apply one size fits all to the industry, but depends on whether specific projects are reasonable."The CSRC only reviews whether the merger will affect the interests of small and medium investors, without judging who is better and who is worse in the industry."

In fact, from a valuation perspective, Huanrui Century's valuation is 3 billion yuan, with an evaluation value-added rate of 278.9%. In sharp contrast, when Storm Group planned to acquire Caocao Bear Pictures, the target value was 1.52 billion yuan, with a value-added rate of 3,881.53%.

Editor: yvonne