Bona Film absorbs BAT to improve its industrial form, and undervalued valuation is an incentive for privatization

Against the background of last year's A-share bull market, some Chinese stocks began to delist and return to A-shares. Bona Films is one of the returning army. On June 12 last year, Bona Films announced that it had received privatization offers from its chairman Yu Dong, Sequoia Capital and Renaissance International. Bona Films chose to privatize and delist and return to the domestic capital market.

Original title: Imagination space for Bona Film's A-share listing

The China film market maintained a vigorous development trend in 2015. In 2016, the development momentum of China's film market remained undiminished. As the flagship representative of private film companies, Bona Films Group (hereinafter referred to as "Bona Films") has also grown together in the past year following the general trend of China film market.

Undervalued valuations are an incentive for privatization

. In fact, privatization and delisting require a lot of financial resources and energy, and once it fails, all costs will be lost. Faced with such a big risk, why did Bona Film still choose to return to the domestic capital market?

Although not the most direct reason for the rapid development of the film and television industry, it is the most fundamental reason. With the popularity of domestic film and television dramas, especially the box office of the film industry, the box office has soared from 29.6 billion yuan in 2014 to 44 billion yuan in 2015, an astonishing increase, but it is still far from the 300 billion yuan film market predicted by Ma Yun. Faced with such a huge cake, the popularity of the domestic market has made all local investors excited, but Bona Films, as a first-line domestic film and television company, has never been able to let go. Since Bona Films is listed overseas, its investors are very unclear about China's consumers, market, corporate strategy and development logic, so Bona Films can only look forward to the cake and sigh.

The inability to judge the market is not the most critical reason. The key point is whether investors are willing to contribute. At this point, compared with domestic investors, American investors have different enthusiasm for China's listed companies, which is reflected in the huge differences in valuation of similar companies listed on different capital markets at home and abroad.

In June 2015, when Bona Films proposed its privatization plan, data showed that by comparing the market value of Bona Films, Huayi Brothers and Enlight Media, it was found that Bona Films had a market value of US$801 million at that time.(approximately RMB 4.973 billion), while Huayi Brothers has 70.18 billion yuan, and Enlight Media has 52.064 billion yuan, which are 14 times and 10 times that of Bona Films respectively. In the eyes of many people, the true market value of Bona Films There should not be a huge gap with similar companies.

From this point of view, one can imagine the psychological gap between Bona Film and its shareholders, which is listed in the United States. No wonder Yu Donghui, the actual controller, felt aggrieved: "Alibaba Group (hereinafter referred to as" Ali ") invested 2.4 billion yuan in Enlight Media to obtain 8.8% of the shares. In the privatization transaction of Bona Films, Ali only invested 86 million US dollars (equivalent to about 500 million yuan), but took 10% of the shares." Based on the valuation level of similar domestic listed companies, if Bona Films returns to domestic listing, its market value will be no less than 50 billion yuan, which is 8 to 10 times higher than its market value in the U.S. capital market.

Perhaps this is the most critical and direct motivation for Bona Film to return to the domestic capital market.

Absorbing BAT to improve the industrial form.

In the plan disclosed by Bona Film at the end of 2015 to privatize and return to A shares, Alibaba, Tencent, CITIC Securities, Fosun International, Red Shirts Capital, Softbank Saifu, and Bona Film founder Yu Dong and other big buyers have jointly formed a "luxury group" to help its return. Putting aside financial investment institutions such as Sequoia Capital and Softbank Saifu, in the single BAT portfolio, two big shots, Alibaba and Tencent, participated in the return and re-listing process of Bona Films. Such integration is not just an integration at the capital level, but more importantly, an integration at the strategic level. For Bona Films, whether it is active or passive, BAT's participation will undoubtedly bring about a new industrial form and industrial pattern of "Internet + Film".

For Bona Films, in addition to completing privatization transactions in China and improving its industrial form, it has also turned its investment focus to the international market. It is understood that in November last year, Bona Films officially announced an investment of US$235 million in the well-known Hollywood entertainment company TSG Entertainment Finance Co., Ltd. for six mainstream commercial blockbusters produced by 20th Century Fox (hereinafter referred to as "Fox"). investment. In 2016, the cooperation between Bona Film and Fox will continue to advance. As an investor, Bona Films will participate in Fox's ongoing financing plan. The capital invested by Bona Films will be used for Fox's latest blockbusters from 2016 to 2017,"Independence Day 2" and "X-Men: Apocalypse","The House of Girls" and "Rise of the Planet of the Apes: The Ultimate Battle". In the future, Bona Films will participate more in mainstream Hollywood film production, bring more high-quality international productions into the China domestic market, and promote the integration of China films with international high standards as soon as possible.

However, for Bona Film, it is difficult to draw conclusions on whether its subsequent performance in returning to the domestic capital market is good or bad. However, those successful cases that have returned may serve as a reference.

On November 11, 2015, Giant Network's backdoor Century Cruises, which completed its privatization, went up to the daily limit as soon as trading resumed, creating a stock market legend with 19 consecutive one-word daily limits. Coincidentally, after Focus Media resumed trading through a backdoor Qixi Holdings, its share price has also risen from 13.68 yuan/share to 45.21 yuan/share at the close of December 29, 2015. Despite several ups and downs in the stock market, its share price has still risen by 230%, and the overall market value was once close to 200 billion yuan.

Therefore, the return of Bona Films may create another capital myth like Giant Network or Focus Media. But what is more fundamental is not the increase in valuation, but the increase in valuation has brought more open space for capital operations to Bona Film. When it was listed in the United States, due to its relatively small market value, it was facing the huge threat of being acquired by similar domestic listed companies at any time. However, the sharp rise in market value after the return will bring Bona Film strong strength and huge opportunities for industrial integration. Coupled with the resource advantages brought by Alibaba and Tencent, if grasped well, it will have a decisive impact on the entire film industry; if you don't grasp it well, there will be no essential difference between returning and not returning. I hope that those Chinese stocks that plan to return or are returning like Bona Film will imagine the growth space after their return and bring back a surprise or surprise to the domestic industrial transformation.

Editor: vian