The film and television industry has a big bubble, the regulatory authorities strictly control cross-border mergers and acquisitions, strictly prevent the explosion of the virtual economy

"Cross-border mergers and acquisitions have a lot of hype and capital operations, showing the characteristics of professionalism and virtual economy. Many companies in the restricted film and television industry that participated in gambling were ultimately proved to have substandard performance. In order to prevent the explosion of the virtual economy, it is reasonable for the regulatory authorities to take measures to rectify it."

Original title: Supervision squeezes the bubble, film and television mergers and acquisitions have repeatedly failed

. The attitude of the regulatory authorities has poured cold water on the once-popular film and television industry.

On August 1, Wanda Cinema issued an announcement that it planned to suspend the major asset reorganization injected into Wanda Film and Television. This is not the first case in which asset reorganization has been suspended after the regulatory authorities strictly reviewed mergers and acquisitions in the film and television industry.

On the evening of June 7, Storm Group issued an announcement stating that the company's 3.1 billion yuan purchase of three companies including Caocao Bear Pictures had not been approved by the China Securities Regulatory Commission. Also rejected were Donde Films. On the evening of June 24, Tangde Film and Television announced that the company had decided to terminate the planning of major asset reorganization matters.

Behind the successive rejection of mergers and acquisitions of film and television companies is the regulatory authorities 'determination to strictly control mergers and acquisitions and refinancing in film and television and other industries.

High-performance commitment

plans cannot keep pace with changes.

On August 1, Wanda Cinema announced that it would suspend the acquisition of major assets such as Wanda Films and Legendary Pictures. Regarding the reasons for the suspension, Wanda Cinema said that the securities market environment had undergone major changes.

As early as May 11, some media reported that the China Securities Regulatory Commission had stopped cross-border fixed growth of listed companies, involving four industries: Internet finance, games, film and television, and VR. Regulators did not come forward to refute the report.

Market news pointed out that higher valuations and high performance commitments may be the reasons for the suspension of Wanda Theater's reorganization.

Wanda Film and Television once promised in the reorganization announcement that the committed net profit in the next three years will not be less than 1.3 billion yuan, 1.66 billion yuan, and 2.138 billion yuan respectively. It is worth noting that this performance commitment exceeds the performance of all A-share listed film and television companies.

Among the A-share listed film and television companies in 2015, Huayi Brothers deducted non-profit of 470 million yuan, Huace Films and Television achieved non-profit of 369 million yuan, and Enlight Media achieved non-profit of 362 million yuan. The sum of the three performances is only 1.201 billion yuan.

The suspension of reorganization of Wanda Theater Line is not the first case. Since the beginning of this year, Storm Group, Tangde Film and Television, Wanda Cinema, LeTV, Gongda Electroacoustic, Huanrui Century, etc. have all put out asset injection or reorganization plans. Currently, only Huanrui Century has approved reorganization.

It is worth noting that issues such as companies in the film and television industry have not been established and developed for a long time, rapid valuation growth, large differences between historical performance and committed performance, and sustainability of profitability have always been key issues of regulatory concern.

Like Storm Group, LeTV Pictures promises a net profit of no less than 520 million yuan, 730 million yuan, and 1.04 billion yuan for 2016-2018, which is also higher than market expectations. Currently, the reorganization of Le Pictures has not yet been approved by the China Securities Regulatory Commission.

The only one that passed the reorganization was Huanrui Century. On July 22, its backdoor Xingmei joint listing successfully passed the meeting. "The principle of one-case discussion is implemented in the M & A review of the film and television industry. Some projects with solid assets and stable performance will still be released, while Huanrui Century meets the requirements." Shen Meng, executive director of Xiangsong Capital, told reporters.

Huanrui Century's non-profit deduction in the next three years will not be less than 223 million yuan, 270 million yuan and 343 million yuan respectively. Its net profit compound annual growth rate during the commitment period will be 24%, corresponding to a dynamic PE of committed performance in 2016. times. In the same period, Storm Group promised a compound annual growth rate of 40% and a dynamic PE of 18 times for Caocao Bear Pictures.

The industry bubble is

relatively large. Compared with the current mergers and acquisitions in the film and television industry that have collapsed one after another, the capital operation of the film and television industry last year was a flourishing one.

When the box office of the the mainland of China film market was fixed at 44 billion yuan last year, the market generally believed that the China film market would usher in a new round of explosion. The ultra-high box office of 6.875 billion yuan in February 2016 also made the market more affirm this climax and directly ignited capital speculation in the film and television industry. Many stars used the fan effect to participate in capital operations, and their value doubled.

In fact, in recent years, stars have become entrepreneurs and investors and have begun to flock to the capital market in large numbers. Film and television companies are becoming more and more keen on "buying stocks for thousands of dollars", opening up their equity to stars and then realizing it through the noisy capital market. Many stars "resell" shell companies to listed companies, which not only stimulates the stock price of listed companies to soar, but also makes a lot of money themselves.

In November last year, Huayi Brothers acquired "Dongyang Meila" founded by Feng Xiaogang for 1.05 billion yuan (a shell company with no actual business). At that time, the target company was only established for two months, with negative assets and no actual business. After being acquired, Feng Xiaogang's worth immediately increased sixfold.

In July last year, Sanxiang Co., Ltd. spent 1.9 billion yuan to acquire 100% equity of Zhang Yimou's team Guanyin. At that time, Guanyin's net assets were 99.6 million yuan, a premium rate of more than 15 times. Through this merger, Zhang Yimou will cash in 237 million yuan at a high premium and indirectly obtain 36.4998 million shares of Sanxiang shares, with a market value of approximately 274 million yuan.

The asset reorganization of the high-profile LeTV has increased the income of almost half of the stars in the entertainment industry by more than 10 times. At the end of last year, the announcement stated that LeTV planned to issue 165 million shares at a price of 41.37 yuan/share and pay 2.979 billion yuan in cash for a total price of 9.8 billion yuan to acquire 100% equity of LeTV Pictures. The counterparties include Zhang Yimou, Guo Jingming, Sun Honglei and many other stars, including almost half of the film and television circle.

"There is a big bubble in the valuation of the film and television industry, and the high valuation has caused market doubts." An investment banker from Southwest Securities, who declined to be named, told reporters,"Box office flooding is common in the film and television industry. This false prosperity poses great risks to the film and television industry and enterprises and capital that cross the border to the film and television industry. It is expected that it will not relax in the near future."

Regarding the regulatory authorities 'strict investigation of mergers and acquisitions in the film and television industry, Shen Meng told reporters: "This is mainly because of the emergence of many bubble projects with high valuations, high performance commitments but light assets, especially some so-called star securitization projects, which are for listed companies. There are great risks for other investors, but this kind of review does not completely deny mergers and acquisitions of film and television projects."

Editor: Nancy