Great Wall Film and Television was inquired about by the Shenzhen Stock Exchange and accepted the offer at a premium of 31 times. Jiang Wenli and his wife participated in the company

Compared with the current asset book value during the premiere period, the valuation premium of this transaction is as high as 31 times. Therefore, Great Wall Film and Television received a reorganization inquiry letter issued by the Shenzhen Stock Exchange on December 27, 2016.

After half a year of suspension, Great Wall Film and Television's long-awaited "big move" was finally released: in order to strengthen its film business, the company plans to spend 1.895 billion yuan to acquire two film and television companies. However, while Great Wall Film and Television's generous efforts, it also attracted inquiries from the Shenzhen Stock Exchange.

On December 14, 2016, Great Wall Film and Television released a reorganization plan. The company plans to spend 1.895 billion yuan to acquire 100% equity of Beijing Premiere Times Culture and Zhejiang Dana Pictures, and at the same time raise no more than 563 million yuan in matching funds.

In this transaction, Gu Changwei, Jiang Wenli and his niece Ma Sichun were prominently included in the shareholder list of the premiere era, which made the transaction attract much attention. It is understood that Gu Changwei and Jiang Wenli jointly directly and indirectly hold 38.5% of the equity of Premiere Times, with a value of 520 million yuan based on the purchase price; Ma Sichun's personal direct and indirect shareholding ratio is 8.74%, with a value of 118 million yuan.

Compared with the current asset book value during the premiere period, the valuation premium of this transaction is as high as 31 times. Therefore, Great Wall Film and Television received a reorganization inquiry letter issued by the Shenzhen Stock Exchange on December 27, 2016.

Faced with doubts about the high-premium acquisition, Great Wall Film and Television said in response to an interview with reporters: "The two target companies in this acquisition have already conducted pre-evaluations by evaluation agencies with securities qualifications. Due to the good growth of the target companies in the future, the valuation premium rate is high. This is an important strategic decision for Great Wall Film and Television to fully enter the big film industry."

According

to the plan, Great Wall Film and Television plans to purchase 100% equity in Premiere Times held by seven natural person shareholders including Leyi Media, Han Wei and Gu Changwei, and 100% equity in Dana Pictures held by 12 natural person shareholders including Bao Chunlei, Tong Liming and Sun Zhihua, by issuing shares and paying cash. The total consideration for this transaction is 1.895 billion yuan, of which the share-based payment amount is 1.353 billion yuan, the number of shares issued after purchasing assets is 110 million shares, and the reserve price of the issued shares is 12.3 yuan/share. The transaction price for the premiere era is tentatively set at 1.35 billion yuan, and the transaction price of Dana Pictures is tentatively set at 545 million yuan.

In addition, Great Wall Film and Television plans to adopt an inquiry method to raise funds totaling no more than 563 million yuan from no more than 10 specific objects, which will be used for cash consideration and intermediary fees for this transaction.

In this regard, Great Wall Film and Television stated that after the transaction is completed, the company's main business will fully enter the big film industry on the basis of its current business, build a big film industry chain, enter the distribution channel side, and implement the "full content, full industry chain" strategy.

Data shows that Premiere Times is a film and television drama company engaged in film and TV series production, distribution and derivative businesses, artist brokerage services and post-production related services. Among the current shareholders, Gu Changwei, Jiang Wenli (formerly known as Jiang Wenli), Gu Changning, Ma Sichun and Jiang Wenjuan hold 12.13%, 8.4%, 7%, 4.66% and 1.4% of the equity of Premiere Times respectively. At the same time, the above five people also hold a total of 72% equity in Leyi Media, while the latter holds a 40.84% equity in Premiere Times.

It is worth noting that the above five people belong to the same family. Gu Changwei is the "fifth-generation" film director in China and has a husband-and-wife relationship with Jiang Wenli, Jiang Wenjuan and Jiang Wenli are sisters, Jiang Wenjuan and Ma Sichun are mother-daughter relationship, and Gu Changwei and Gu Changning are cousins.

It is not difficult to see that the premiere era is quite like a family business. However, the reporter inquired about industrial and commercial information and found that the premiere era was not founded by Gu Changwei's family, but entered the premiere era through equity transfer in March last year, less than three months after the suspension of Great Wall Film and Television. Therefore, the outside world once questioned that Gu Changwei's family was suspected of suddenly investing in shares.

In response to this, Great Wall Film and Television responded to a reporter's interview letter and said: "Han Wei, Gu Changwei and other shareholders entered the premiere era in March 2016 by transferring the equity of the original shareholders of premiere era or increasing capital. Since then, the original shareholders of premiere era no longer hold shares in premiere era. After the company's acquisition, the share consideration received by shareholders such as Han Wei and Gu Changwei will also fulfill their lock-in obligations and meet the requirements of relevant laws and regulations. There is no suspicion of surprise participation."

The valuation of the premiere era was questioned

. It is understood that Leyi Media received a total of 25.63 million shares and a cash consideration of 236 million yuan, equivalent to the shares of five people in Leyi Media. They received a total of 18.45 million shares +169 million yuan in cash.

However, both target companies have "high valuation risks". As of October 31, 2016, the book value of Dana Pictures 'net assets was 53.1188 million yuan. The relevant evaluation work has not yet been completed. The estimated value is 545.7516 million yuan, and the value-added rate is 927.42%; The book value of the net assets of the premiere era is 42.0158 million yuan, and the relevant evaluation work has not yet been completed. The estimated value is 1.3556367 million yuan, with a value-added rate of 3126.49%.

According to the unaudited consolidated statements of Premiere Times, in 2014, 2015, and January to October 2016, Premiere Times's operating income was 1.8947 million yuan, 8.3549 million yuan, and 55.38 million yuan respectively, and its net profit was 187,600 yuan, 3.6823 million yuan, and 32.3876 million yuan respectively.

In response to external doubts about this high-premium acquisition, the company responded to the interview letter and said: According to the "Performance Forecast Compensation Agreement" signed between the company and Premiere Times, Premiere Times's committed net profits for 2017, 2018, and 2019 will be no less than 90 million yuan, 125 million yuan, and 159.1 million yuan respectively, with a cumulative total of no less than 374.1 million yuan. Based on the 2017 net profit commitment, the acquisition P/E multiple of this transaction is approximately 15 times; based on the current tentative transaction price of 1.35 billion yuan between the company and the premiere era, the acquisition P/E multiple of this transaction (tentative transaction price/Average annual net profit of the target company for the next three years) is approximately 10.8 times.

Another target company, Dana Pictures, was established in 2010 and was officially listed on the New Third Board on August 12, 2016. Its main business is investment and management of chain theaters. It has 5 theaters in Zhejiang and Jiangsu, providing film screening, product sales, release of screen patch advertisements, and position advertisements. Dana Pictures 'unaudited main financial data shows that in 2014, 2015, and January to October 2016, Dana Pictures' operating income was 30.8192 million yuan, 127.3124 million yuan, and 122.6365 million yuan respectively, and its net profit was-4.3786 million yuan, 11.2848 million yuan, and 18.8984 million yuan respectively.

Great Wall Film and Television said that on the one hand, Dana Films is the subject of a light asset-related transaction, and its exclusive central location, decoration design, personnel resources, management experience, etc. of its theater cannot be reflected in the company's books, resulting in its low net assets. On the other hand, most of Dana Pictures 'theaters are still in the early stages of operation, and the screening business has greater room for growth.

"There are not many existing resources that the film and television industry can seize. After good companies and good IPs are all divided up, some companies have targeted companies with stories and seemingly IP under the aura of stars. Predatory development rather than creative development is actually the root cause of the large number of premium acquisitions in the domestic film and television industry." Zhang Shule, a commentator on the entertainment industry, pointed out.

Strict supervision

After listed companies seized the IP of novels and games, in 2016, star IP became the "hot potato" that listed companies competed for.

In March 2016, Tangde Film and Television announced that it planned to acquire a 51% stake in Aimei in which film star Fan Bingbing and her mother Zhang Chuanmei participated; while Stormwind Technology announced that it planned to invest 1.08 billion yuan to acquire a 60% stake in Jiangsu Caocao Bear Film Industry. The shareholders of Caocao Bear Film Industry include film star Liu Shishi (formerly known name of Liu Shishi) and another film and television star Zhao Liying. In fact, against the background of stricter supervision, the film and television reorganization in 2016 did not go smoothly. The above two acquisition plans were not successful and died one after another. In addition, in 2016, LeTV Pictures 'injection into LeTV was also questioned by the Shenzhen Stock Exchange due to issues such as the involvement of star shareholders. Therefore, whether Great Wall Films can successfully complete the acquisition this time has attracted much attention from the market. The company stated that this transaction still needs to be reviewed and approved by the company's shareholders 'meeting and approved by the China Securities Regulatory Commission, and there is uncertainty.

In the eyes of industry insiders, listed companies 'high-premium acquisitions of star companies have attracted the attention of regulators, and star securitization is facing stricter review and disclosure requirements. Zhang Shule believes that, in fact, these are all the continuation of enterprises 'crazy competition for IP, and they are also the last madness of the IP chaos.

Famous economist Song Qinghui told reporters: "The competitiveness of film and television companies is the entire industry chain with highly coordinated content production, output platforms and distribution channels. This kind of star-based investment implies higher risks. The ultimate focus of the cultural industry is to be deep, precise, thorough and focused."

Editor: yvonne