Focus on Star Resources Oriental Network's high-premium acquisition performance commitment to be tested by the market

On the 5th, Dongfang Network announced that it plans to spend 3.536 billion yuan to acquire three cultural media companies: Jiabo Culture, Huahua Culture and Yuanchun Media. Xu Qing, Jiang Qinqin, Chen Jianbin, Wang Xuebing and many other stars have increased the premium.

Original title: Oriental Network plans to buy 3.5 billion yuan. The acquisition logic behind the high premium of three film and television companies

. After announcing a suspension of trading in May this year for major asset restructuring, Oriental Network submitted a restructuring report on November 5. According to the agreement, Dongfang Network plans to spend 3.536 billion yuan to acquire three cultural media companies: Jiabo Culture, Huahua Culture and Yuanchun Media.

It is worth noting that during the suspension period of Dongfang Network, on May 25, Xu Qing, Jiang Qinqin, Chen Jianbin, Wang Xuebing and other stars rushed to invest in Jiabo Culture, one of the targets. Among them, Xu Qing invested 2 million yuan and Chen Jianbin 1 million yuan. Liu Bin (actor, producer) and Wang Weimin (producer) each invested 500,000 yuan. The amount of investment by Wang Xuebing and Jiang Qinqin was not disclosed.

The addition of stars has attracted much attention to this asset reorganization. However, the high premium of this acquisition has also attracted industry attention.

According to the reorganization agreement, the evaluation values of Jiabo Culture, Huahua Culture and Yuanchun Media are 1.684 billion yuan, 1.121 billion yuan and 837 million yuan respectively. Compared with the book value, the value-added rates are 1,053.94%, 960.58% and 200025.97%, respectively.

Improving business layout

This reorganization will help improve Dongfang Network's business layout in the film and television field.

In 2015, the revenue of the Oriental Online Cultural Media segment was 226 million yuan, an increase of 410.09% over the same period. In the first half of this year, its cultural media segment achieved revenue of 164 million yuan, and the film and television investment and operation business accounted for more than 40%.

The acquisition is intended to strengthen the company's content production capabilities. Oriental Network said that through this acquisition, it will further strengthen its capabilities in the production of movies, TV series and TV program content, form core competitiveness in self-made content, help complete the company's further reserve of IP, and use the relevant target company's film and television works. The industry resources and audience base of TV programs will enhance the influence of other products under the company's pan-entertainment platform.

At present, Dongfang Network's main businesses include film and television (sofa theaters, film investment, etc.), animation (original, theme parks, etc.), channels ("Silk Road" TV stations, digital TV operations, etc.), measuring tools, etc.

Among the three targets of this acquisition, Jiabo Culture was established in 2013 to invest and shoot films "Tiny Times 3","Tiny Times 4","To Youth: You Are Still Here","A Spoon", etc.; Huahua Culture was established in 2014 and has participated in the investment, distribution and promotion of many overseas introduced films such as "Transformers 4","Mission Impossible","007: Ghost Party"; Yuanchun Media is a provider and operator of domestic TV programs and online film and television content, producing the reality show "Dream Maker", etc.

Among them, Song Xianqiang, the controlling shareholder of Jiabo Culture, served as the producer of the film "A Spoon" directed by Chen Jianbin in 2014. Song Xianqiang became the legal representative of the company on March 18 this year. In May, stars such as Chen Jianbin and Jiang Qinqin invested in Jiabo Culture.

In June, Jiabo Culture released a series of film listings in Shanghai. Wang Weimin was present to help out. Xu Qing, Wang Xuebing and others also expressed their support. All the stars who have invested in the shares have direct business connections with the company.

In the same month, Chen Xiao, the former shareholder of Jiabo, transferred his equity to Shenzhen New Vision Hongfu Investment Fund Partnership (hereinafter referred to as "Shenzhen New Vision"). In May, Shenzhen New Vision became a shareholder of another target-Huahua Culture. The previous shareholder was Shenzhen New Vision Investment Management Co., Ltd.(hereinafter referred to as "New Vision Investment").

The reporter checked the industrial and commercial information and found that New Vision Investment was established in December last year. Among the four investors, Chen Xiao was a shareholder of Jiabo Culture and Chen Jiansheng was the legal representative of Jiabo.

Between the two targets, in addition to the intersection of shareholders, there are also connections between their businesses.

In the first half of this year, part of Jiabo Culture's revenue came from Dongfang Huashang (Beijing) Cultural Communication Co., Ltd.(hereinafter referred to as Dongfang Huashang), formerly known as Zhonghui Huashang (Beijing) Cultural Communication Co., Ltd., a wholly-owned subsidiary of Dongfang Network. In July last year, Huahua Culture signed a cooperation agreement with Zhonghui Huashang.

Another Yuanchun Media company was established in 2008 and is a newly added acquisition target in this announcement. Oriental Network said the acquisition of Yuanchun Media will help the company strengthen its ability to produce TV program content.

Does star investing in shares increase the premium?

In fact, incidents involving stars investing in stocks are no longer new.

In addition to this surprise investment by Xu Qing and others, in May this year, Huang Xiaoming and other stars invested in LeTV Pictures; in March, Liu Shishi invested in Straw Bear; in August, Zhao Wei invested in Wanjia Culture, etc.

Some investors told reporters that star shares are one of the reasons for the high purchase price, and it is also a good opportunity for stars to cash out.

Regarding this phenomenon, Wang Ran, founder of Yikai Capital, once said in the article "Descendants of the Bubble: How should China Film and Television Companies Value and Accumulate Value in the Gold Age" that stars and directors establish companies or invest in film and television companies, converting a large part of their personal income (far exceeding the proportion of normal brokerage companies) into the company's income.

This extra income can be almost directly converted into profits. The profits are immediately amplified by the price-to-earnings ratio in the capital market and sold to A-share companies or investors. In the process, artists sell all or part of their shares to complete self-value amplification and early recovery.

A person familiar with film and television restructuring told reporters that generally speaking, the acquisition valuation of film and television companies is calculated at 10 to 13 times the proforma performance.

Since the targets of this acquisition are all film and television companies and are light assets, their actual assets are generally much higher than the book value. Such acquisitions mainly depend on the performance commitment of the target company.

According to the agreement, the other party promised to reach a profit commitment of 1.017 billion yuan in three years. Among them, from 2016 to 2018, Jiabo Culture promised to achieve net profits of no less than 120 million yuan, 150 million yuan and 195 million yuan respectively; Huahua Culture promised no less than 80 million yuan, 104 million yuan and 130 million yuan; Yuanchun Media was no less than 60 million yuan, 78 million yuan and 100 million yuan.

Can performance commitments be achieved?

The reporter reviewed financial data and found that in 2014, 2015 and the first half of this year, Jiabo Culture's net profit was-7.751 million yuan, 42.1487 million yuan and 6.5042 million yuan respectively; Huahua Culture's net profit was 366,200 yuan, 4.0299 million yuan and 21.2969 million yuan respectively; Yuanchun Media's net profit was-11.1087 million yuan, -453,500 yuan and 5.7889 million yuan respectively.

Judging from the current financial data, it is far from the promised performance, while the film and television industry has great uncertainty, and whether it can achieve the goal remains to be tested by the market.

Editor: vian