Sanqi Mutual Entertainment acquired Zhonghui Film and Television for 1.2 billion yuan, and the New Third Board Company began to accelerate its integration into the main board?

More and more New Third Board companies are beginning to integrate into listed companies. Lehua Culture and Zhonghui Film and Television are sold 100% to listed companies; Heli Chenguang and Jimei Pictures have begun to disclose IPO information and stopped disclosing information on the New Third Board; other New Third Board companies are considering IPO, mergers and acquisitions or multiple listing paths such as backdoor.

Following the 100% acquisition of Lehua Culture by Gongda Electroacoustic (the acquisition was not completed at the end), another example of the New Third Board Film and Television Company being acquired by a listed company.

Recently, listed company Sanqi Mutual Entertainment announced that it plans to acquire Zhonghui Film and Television for 1.2 billion yuan. As a new third board company that has only been listed for half a year, Zhonghui Film and Television met with the public for the first time three months ago and released the 2016 film and television list. Among them, the joining of Hou Xiaoqiang, former CEO of Shanda Literature and current general manager of Zhonghui Film and Television, and Lu Hao Jiji, director of "The Crown Princess", is quite interesting and is also one of the important reasons for this premium acquisition.

The listed company Sanqi Mutual Entertainment has always been a leader in the game industry. It has launched a number of popular games such as "Legendary Domination". After completing the overall listing in 2015, it began to make a pan-entertainment layout. This acquisition of Zhonghui Film and Television is also their successor to VR. After that, it will officially enter the film and television industry, and will gradually complete some pan-entertainment layouts such as animation, live broadcast, and e-sports in the future.

With the disclosure of this acquisition, the reporter found that more and more New Third Board companies began to integrate into listed companies. Lehua Culture and Zhonghui Film and Television are sold 100% to listed companies; Heli Chenguang and Jimei Pictures have begun to disclose IPO information and stopped disclosing information on the New Third Board; other New Third Board companies are considering IPO, mergers and acquisitions or multiple listing paths such as backdoor.

Efficient IP platform + excellent production team = 1.2 billion

Zhonghui Film and Television's acquisition is relatively special. Sanqi Mutual Entertainment first suspended its trading without determining the target, and then came into contact with Zhonghui Film and Television.

"After the suspension was suspended, we contacted many film and television companies, both pure production companies and platform companies, and finally settled on Zhonghui Film and Television," Yang Jun, senior vice president of Sanqi Mutual Entertainment and who led the acquisition, told reporters.

He further said that he took a fancy to Zhonghui Film and Television mainly based on the following three points:

1. The IP buyer team headed by Hou Xiaoqiang has built an IP discovery platform. In just two years since its establishment, it has purchased more than 50 works including "The Sacrifice of Suspect X" and "SCI Mysteries Collection", with various types including movies, TV, online dramas and animation.

2. The content production team headed by Lu Hao Jiji and Dong Jun. Dong Jun is the company's third largest shareholder and is responsible for content production. He has previously directed TV series such as "Shenzhen Shared Rent" and "The Top Ex-Wife". Lu Hao Jiji and his father Lu Haiyan established a new company in March this year to jointly develop works.

3. Some of the works purchased by Zhonghui Film and Television are very suitable for game development, are in line with the tone of Sanqi Mutual Entertainment Game Company, and can assist Sanqi Mutual Entertainment's "movie-game interactive" plan. Currently, the two have begun to jointly incubate some works.

Overall, Zhonghui Film and Television is an IP platform that can meet the requirements for the number of works. At the same time, it also has excellent producers to satisfy the pursuit of high-quality products. The works that have been filmed include the online drama "Looking for a Past Life" in cooperation with iQiyi, the movie "The Dedicate of Suspect X" co-operated with Youpeng Su of Light, etc., which are the main considerations for the valuation of 1.2 billion yuan.

Regarding the wholly-owned acquisition, Yang Jun said that the next step will definitely be to complete the integration of the two companies. 100% shareholding will help accelerate the integration and eliminate the resistance of other shareholders.

Sanqi Mutual Entertainment's pan-entertainment layout: live broadcast, animation, VR and film and television

"Sanqi Mutual Entertainment and Zhonghui Film and Television were not connected through this wholly-owned acquisition. It was agreed through the previously announced 300 million yuan convertible bond agreement that the two companies have already formed a capital connection," Yang Jun introduced.

According to the previous announcement of Sanqi Mutual Entertainment, Sanqi Mutual Entertainment provided a loan of 300 million yuan to Zhonghui Film and Television, agreeing that if Sanqi Mutual Entertainment successfully acquired Zhonghui Film and Television within one year, Zhonghui Film and Television would only have to repay the principal and interest; If the acquisition cannot be completed, 300 million yuan will be converted into debt, accounting for 25% of the shares based on the valuation of 1.2 billion yuan.

Sanqi Mutual Entertainment is so persistent in acquisitions that it has officially announced its entry into the film and television industry. This is another industry layout after the pan-entertainment strategy relays VR investment.

Previously, Sanqi Mutual Entertainment had participated in the investment of Canadian VR game content provider Archiact and VR content company Tianshe Culture with US$3.16 million and US$10 million respectively. The two made their debuts during this year's China Joy respectively and launched the VR games "MATRJX Battle" and "Crying Baby". There were long queues in the experience room and were well received by many experiencers.

"Our logic is very simple, that is, content. Sanqi Mutual Entertainment started out as a game and is relatively good at interactive entertainment content. Therefore, combined with its own content genes, whether it is investing in VR or investing in Zhonghui Film and Television, it is a collection of content fields." Qiang Xiaodan, head of the Sanqi Mutual Entertainment Investment Department, told reporters. For future investment in VR, they hope that the investment company has the following three conditions: research and development capabilities and experience of VR entertainment content; experience in offline experience store solutions; and coordination effect between the invested teams.

"At present, in addition to games, which is our strength, other segments are relatively weak in the pan-entertainment field. We will deploy it through investment. After the industry develops, we may adopt some acquisitions or other models. Integrate it into the business system." Qiang Xiaodan said that when selecting investment targets, he would pay attention to competitive barriers and look for companies with high cost performance. He has invested in many companies, covering fields such as live broadcasting and animation.

Two of the animation companies are Wuhan Art Painting Kaitian and Shanghai Jueli Culture. They are developing related original animations and are expected to go online in 2017.

The New Third Board Film and Television Company is accelerating its escape?

Zhonghui Film and Television was 100% acquired by Sanqi Mutual Entertainment this time, which also means that it can "retire unscathed" from the New Third Board and jump directly into the arms of listed companies, saving itself the trouble of switching.

Reporters have recently observed that many film and television companies on the New Third Board are preparing to "withdraw" from the New Third Board. Some of them have gone through IPOs, such as Heli Chenguang, producer of "Little Times", and Jimei Pictures, a veteran film and television company; some have chosen to sell wholly-owned companies on the main board, such as Lehua Culture, to Gongda Electroacoustic, etc.; and more companies are seeking either of the above two.

"The liquidity of the New Third Board is not as good as that of the main board. Especially after the tiered system was introduced, the Matthew effect became more obvious. Only a small number of companies are relatively active in capital, and most of them are not." An investor told Entertainment Capital that the New Third Board is relatively of little significance and value now. Many companies want to serve as a springboard to enter the main board after a brief transition.

Therefore, many New Third Board companies began to "hope to see the main board through the transition from the New Third Board. Companies such as Tangren Film and Television all expressed the same meaning during their chats with reporters, hoping to enter a larger capital platform through the transfer.

"There are some companies with good profits. It is reasonable to seek a larger platform through the financial regulations of the New Third Board." Yang Jun affirmed the significance of board transfer and capital operation in a chat with reporters. The platforms and resources of listed companies provide the New Third Board The company brings greater development space.

Editor: yvette