Star shareholders gather together on the new third board film and television companies, most of whom are planning to switch to IPOs

the capitalization of film and television assets, whether by mergers and acquisitions, landing on the new third board, active IPO, etc., should take reasonable pricing and reasonable valuation as the core.

original title: star shareholders gather New third Board Film and Television Enterprises

since the beginning of this year, new third board film and television listing companies have increased rapidly, especially film and television companies with the background of star shareholders. At the same time, many new third-board film and television companies plan to transfer to IPO to land in the A-share market. Industry insiders said that the capitalization of film and television assets, whether by mergers and acquisitions, or landing on the new third board, active IPO, etc., need to be reasonable pricing, reasonable valuation as the core.

strong > Star shareholders gather together / strong >

Wind data show that since the beginning of this year, 11 new listed enterprises have been added to the new third board film and television plate, including Longda Pictures, Senyu Culture, Kangqi Pictures, Cross-Border Pictures, and so on. As of June 19, the new third board film and television plate listed enterprises has reached 128. At the same time, the new third board company team with star shareholders has become large-scale, including Jiaxing Media, Tianmu Pictures, Digital Film and Television, first Film Media, Xicheng Media, Tang Dynasty Film and Television, Longteng Film and Television, Tian Mei Shang, Qingyu Media, Times Film and so on.

in the film and television industry, well-known actors, directors, producers, agents, singers, hosts, etc., are all defined as "stars" because of their high attention. With the rapid development of the film and television market and the influx of capital, the stars smell the business opportunities in the capital market. The interest binding is the main reason for the introduction of star shareholders in film and television companies.

in the listed enterprises with star shareholders, the head of the film and TV drama division of the first film media is Cui Baozhu, a famous producer and producer. He has participated in the production of films such as "Crouching Tiger, Hidden Dragon", "Kung Fu", "Huo Yuanjia" and "Yangtze River No. 7". He currently holds an 8% stake in the first Film Media. Zhang Xin, the star shareholder of Xicheng Media, has a stake of 2.09%. He has directed and filmed many works such as "Mountain City Bang Bang Jun" and "neighborhood neighbors". He has been the director, deputy general manager and artistic director of Xicheng Media since May 2016. Li Li, another star shareholder of Xicheng Media, has a shareholding of 0.42%. He is now the director of the brokerage business department of Xicheng Media and has participated in the shooting and production of film and television works such as "Mountain City Bang Jun" and "neighborhood neighbors".

people in the industry say that while top artists bring rich income to film and television works, they may also bring high-quality investment projects. For film and television enterprises, "star" shareholders themselves is a unique competitiveness.

it is worth noting that the performance differentiation of the new third-board film and television enterprises is obvious. According to Wind data, among the 128 new third-board film and television companies, 75 companies achieved net profit growth in 2016, accounting for 59% of 95 companies to achieve profits, accounting for 74% of the company's net profits of more than 100 million yuan. They are Helichenguang, Tang Dynasty Film and Television, and Jiaxing Media.

strong > the popularity of M & A has cooled down / strong >

in recent years, the capitalization of star IP is not as expected, and mergers and acquisitions in the film and television industry have changed frequently. In addition to tighter regulation, it is also related to the decline in the overall growth rate of the film and television industry and the poor performance of related companies.

take Great Wall Film and Television as an example. On June 12, Great Wall Film and Television announced the acquisition of the revised draft of the premiere era and Dana Pictures. During the premiere, the operating income in 2015 was 8.3549 million yuan, with a net profit of 3.6718 million yuan, while in 2016, the operating income was 72.5026 million yuan and the net profit was 41.5851 million yuan. In the Dingzeng plan disclosed in December 2016, Great Wall Pictures said that if the deal were completed in 2016, the net profit in 2016 at the premiere would be no less than 52 million yuan. As of October 31, 2016, the valuation of the premiere was 1.35 billion yuan, with a value-added rate of 3168.99%; and the value-added rate of Dena Pictures was 935.62%. Great Wall Film and Television was questioned by the exchange because of the high valuation of the underlying assets and the rationality of the explosive valuation of star shareholders such as Gu Changwei and Jiang Wenli after they took shares in the underlying assets.

Statistics show that since 2014, A-share listed companies have initiated five transactions involving a change of control, targeting companies listed in the new third board film and entertainment industry. Among them, the merger and acquisition of Dena Pictures initiated by Great Wall Film and Television and the 100% equity stake in the premiere time are under way; contact interaction 300 million yuan investment in Sanshang Media 42.86% equity has been completed; the other three transactions have been terminated, including a total of 1.89 billion yuan for the acquisition of 100% equity in Lehua Culture.

in the transaction of contacting interactive merger and acquisition of Sanshang Media, the financial data of Sanshang Media performed poorly, losing 830200 yuan and 1.0685 million yuan from January to November 2015 and 2016 respectively. However, the deal was completed on a small scale and through a cash acquisition.

announcement shows that in January 2017, Liaison Interactive signed an agreement with Sanshang Media and its related shareholders, planning to subscribe for 19.4363 million common shares issued by the underlying company with its own funds of 200 million yuan, and to transfer 9.716 million common shares held by the shareholders of the underlying company with its own funds of 99.9776 million yuan. After the completion of this transaction, contact Interactive will hold 42.86% of the shares in the underlying company.

the deal between Lehua Culture and Gongda Electronics is not so smooth. Lehua Culture has many star shareholders. Among them, Han Geng, Zhou Bichang and Huang Zheng indirectly hold shares of Lehua Culture through Xizang Huaguo, the third largest shareholder of Lehua Culture. It took more than a year for Gongda Electronics to acquire the entire stake in Lehua Culture, during which it also revised the transaction plan and reduced the total transaction volume, but it still failed to take place.

on March 1, Lehua Culture announced that in view of the long operation time of the major issues to be acquired and the great changes in the economic and policy environment, the company's shareholders have different ideas about the conditions and methods of the company's docking with the A-share market, and hope to terminate the merger with Gongda as soon as possible.

the revised plan shows that Dada intends to buy 100% stake in Lehua Culture for 2.32 billion yuan. Of these, 54.95% of the transaction consideration is paid by issuing shares, and the remaining 45.05% of the transaction consideration is paid in cash. In the revised scheme, the payment method of Gunda Electric is still a combination of issuing shares and paying cash, but the total price is reduced to 1.89 billion yuan. At the same time, Lehua Culture's performance commitment has also been lowered, with net profits deducted from 2016 to 2018 not less than 150 million yuan, 190 million yuan and 250 million yuan respectively.

in fact, Lehua Culture is at risk of failing to fulfill its performance commitment. According to the transaction plan, Lehua Culture's committed performance in 2016 is 150 million yuan in net profit after deducting non-profit. According to the 2016 annual report, the company only made a net profit of 59.7657 million yuan. From a historical point of view, Lehua Culture deducted non-net profit in 2013, 2014 and 2015 was 15.7321 million yuan, 25.9867 million yuan and 46.5826 million yuan respectively.

Shen Meng, director of Shansong Capital, told reporters that it is not impossible for film and television assets to be capitalized by mergers and acquisitions by listed companies. But judging from the current situation, in some transactions, the profit commitment of the underlying assets is relatively unreasonable, so regulators have issued a letter of inquiry. At the same time, the high valuation of the underlying assets may harm the interests of other shareholders. "whether the M & A transaction can be completed mainly depends on whether the plan and pricing are reasonable."

for transactions that do not involve a change of control, the number of transactions invested by A-share companies in new third-board film and television companies is also declining. In 2016, A-share listed companies initiated and completed five transactions, including Abyson's 12.2 million yuan investment in 4.98% of Hua Aoshimi's equity; Citic Securities, Societe Generale Securities and other participating dance animation to increase and acquire part of the equity; Leo shares have invested in midsummer Starsky twice, accumulating a total of 20% of its equity; Dongxing Securities and other companies invested in excellent Media. Since 2017, only one similar deal has been completed.

strong > plans to switch to IPO / strong >

since the beginning of this year, a number of new third-board film and television companies have planned to switch to IPO, and some companies have even indicated that their "initial intention" to land on the new third board is IPO in the A-share market. Wind statistics show that there are currently six new third-board film and television entertainment companies in the listing tutoring, including Zhongguang Film and Television, Yongsheng Animation, Dinosaur Park, and Lichenguang, Happy Mahua, good-looking Media. In addition, companies such as Lehua Culture have also revealed the wishes of IPO.

COO and Weng Zhichao, secretary of the board of directors, told reporters that the company's listing on the new third board is to standardize corporate governance in advance and accept supervision through information disclosure. Entering the A-share market through IPO can better integrate into the capital market and have better liquidity, which is conducive to future development. "our core competitiveness is based on the film and television production platform, to establish a complete IP value-added service system, and to create a value-added chain of the whole industry chain. At present, the company has submitted a feedback reply and is waiting for further review notice. "

Financial data show that among the top three companies in the new third board film and television industry in 2016, Hechenguang's operating income and net profit were 603 million yuan and 149 million yuan respectively, an increase of 135.73% and 58.6% respectively over the same period last year. The operating income and net profit of Chinese film and television were 420 million yuan and 134 million yuan respectively, up 44.75% and 50.68% respectively over the same period last year. The operating income and net profit of Jiaxing Media were 333 million yuan and 129 million yuan respectively, up 134.96% and 59.35% respectively from the same period last year.

at present, the overall growth rate of the film and television industry is declining. With regard to the problem of how to maintain performance growth and core competitiveness in the future, Weng Zhichao said that the general performance of film and television companies is not very optimistic, which has a lot to do with the phenomenon of single-film winning in the film and television industry. "the company has risk control and income measurement for each project. If you stop at a single project, you may encounter a similar rule in the financial industry, with only two out of ten projects benefiting. This situation may be even more serious in the film and television industry, or even the 19th rule. " The company will build a film and television production platform to convert single-film revenue into platform-based revenue as much as possible. At the same time, based on the platform flow income to expand to other ends of each project, to maintain a sustained and stable performance.

"huddling" alliances are also a way to reduce performance fluctuations. Take Perfect World as an example, by the end of the first quarter, the company's other non-current assets increased by 882.09% compared with the beginning of the period, mainly due to the prepayment of the equity subscription of Xi'an Jiaxing Film and Television Media Co., Ltd. According to the data, the company participates in Junyi Yunyang and Jiaxing Media through Perfect World Cinema.

Edit: jessica