The termination of overseas mergers and acquisitions in the entertainment media industry has occurred frequently, film, television and entertainment capital has been tightened at sea

"Due to stricter supervision, foreign assets are now more stringent when facing domestic capital that is willing to acquire. Before acquisitions, they are required to understand the detailed capital reserves of domestic companies. As a result, many companies are at a disadvantage in negotiations. In addition, SAFE strictly controls the size of funds and review time, making overseas mergers and acquisitions more difficult."

Original title: Film, television and entertainment capital goes to sea to tighten

the news that overseas mergers and acquisitions in the entertainment media industry have been terminated is endless.

After Xinke Materials was the first to fall into the new rules on overseas mergers and acquisitions, Xinhualong "went one after another" and also announced that it would terminate the acquisition of overseas assets.

At the end of March, Xinhualong announced that due to recent changes in the market environment, the parties to the transaction have greatly different understandings of important terms, and there is significant uncertainty in the continued advancement of the company's major asset reorganization. After careful study by all parties to the reorganization, it is now amicable consultation and unanimously decided to terminate this transaction.

According to the previously disclosed framework plan, Xinhualong plans to acquire mobile game company Beijing Kaitian, overseas game company GramGames and Vanya Culture by issuing shares and paying cash. The reorganization was terminated and Xinhualong's overseas mergers and acquisitions basically fell through. This is another failure case after Xinke Materials since the introduction of the new overseas mergers and acquisitions policy.

In fact, 34 listed companies have initiated overseas mergers and acquisitions, but only 7 have been successful, 9 have failed, and the rest are in progress.

With the introduction of new regulations on overseas mergers and acquisitions at the end of 2016, the overseas M & A market turned cold in the first quarter of this year. According to Thomson Reuters data, the total amount of overseas M & A transactions announced by China in the first quarter of this year was US$23.8 billion, setting a record since 2014. The new low since the beginning is only 1/4 of the 95.1 billion yuan in the same period last year.

Regarding the reasons for the cooling down of overseas mergers and acquisitions, Li Jiachao, an analyst at Yijie.com, told reporters: "Due to stricter supervision, foreign assets are now more stringent when facing domestic capital willing to acquire. Before acquisitions, they are required to understand domestic enterprises. Detailed capital reserves have caused many companies to be at a disadvantage in negotiations. Coupled with the strict control of the capital scale and review time by SAFE, overseas mergers and acquisitions have become more difficult."

Xinhualong's overseas mergers and acquisitions terminated

On March 29, another overseas company that purchased hot capital assets fell at the door of restructuring. The original plan to acquire overseas game company GramGames also fell through.

According to previous plans, Xinhualong plans to acquire mobile game company Beijing Kaitian, overseas game company GramGames and Vanya Culture by issuing shares and paying cash.

Xinhualong suspended trading on October 20, 2016, but while announcing the acquisition of three assets, it also announced a change of ownership. In November last year and January this year, Ningbo Jutai, a subsidiary of Shanshan Group, transferred Xinhualong shares twice, with a shareholding ratio of 28.7%, becoming the controlling shareholder.

As a result, while acquiring game media targets, Xinhualong actually controls human changes. This move is considered by the industry to be a "three-way reorganization" and has become a key regulatory object of the China Securities Regulatory Commission.

Xinhualong also appears to lack confidence in overseas mergers and acquisitions. On March 22, it stated in a risk warning announcement that the reorganization is still in the negotiation stage. Although the company has signed a reorganization framework or intention agreement with the counterparty and is actively promoting the progress of the transaction, the main terms of this transaction have not yet been finalized. There is significant uncertainty in the reorganization and there is a risk of possible termination.

"If you have subsidiaries overseas, you can use overseas accounts to purchase without supervision. However, foreign target parties may not necessarily recognize the acquisition of subsidiaries. However, as long as the funds are sent out from the mainland, the amount exceeding the amount will be strictly regulated, and the approval time will be longer than before, which has become the reason why most companies have given up overseas." Li Jiachao told a reporter from Times Weekly.

Since the implementation of the new rules on overseas mergers and acquisitions on November 18 last year, many companies have terminated the pace of overseas mergers and acquisitions.

The industries that have been highlighted by the regulatory authorities have entered the termination list. In November last year, SAFE and the Ministry of Commerce warned that they might veto overseas acquisitions of assets other than their main business, and required special approval for the transfer of overseas businesses of US$5 million and above.

On December 6 last year, when answering reporters 'questions, the heads of the four departments of the National Development and Reform Commission, the Ministry of Commerce, the People's Bank of China, and the Administration of Foreign Exchange said that the regulatory authorities have paid close attention to the recent emergence of some irrational foreign investment in real estate, hotels, studios, entertainment, sports clubs and other fields. The tendency of irrational foreign investment, as well as the hidden risks existing in large-scale non-main investment, limited partnerships,"mother and child big" and "quick set-up and quick delivery" types of foreign investment, and it is recommended that relevant enterprises make prudent decisions.

After the implementation of this new regulation, overseas mergers and acquisitions in the above four key industries have been repeatedly terminated. In terms of acquiring overseas entertainment industries, companies such as Wanda Group, Xinke Materials, and Xinhualong have successively invested in overseas mergers and acquisitions.

Xinke Materials planned to acquire VoltagePictures, the production company of "The Hurt Locker", for US$350 million last year, but the deal was terminated shortly after it was announced in December last year.

In addition, Paramount Pictures, which has reached a US$1 billion cooperation agreement with Shanghai Film Group and Huahua Media, is currently reported by relevant media that it is difficult to receive Chinese funds. At the same time, the acquisition of MGM by domestic entities has also been suspended.

Behind the repeated failures of overseas mergers and acquisitions, the overseas M & A market turned cold in the first quarter of this year.

Since last year, there has been a boom in Chinese-funded overseas mergers and acquisitions, especially in the film and television industry. Many listed companies have also joined the overseas mergers and acquisitions team. However, since the beginning of this year, there are still 7 listed companies in A-share companies that have initiated overseas mergers and acquisitions. The number is the same as the same period last year.

But even so, the total amount of overseas M & A transactions announced in China in the first quarter was US$23.8 billion, only 1/4 of the 95.1 billion yuan in the same period last year, setting a new low since 2014.

The overseas projects of the Chinese film and television army are progressing slowly

. After the cooperation between Shanghai Film Corporation, Huahua and Paramount Pictures encountered some obstacles, China Film Corporation, which is the first Chinese film company, also moved into overseas markets.

In January this year, Paramount reached a US$1 billion financing agreement with two China companys-Shanghai Film Group and Huahua Media. The two companies will participate in all Paramount's films within three years and provide at least 25% of financing.

However, according to media reports, Paramount has not received funds from China. Not only that, since the announcement of the above news, Paramount Pictures 'situation has been unstable, and Paramount's top management has been unstable. CEO Brad. Gray was ousted in February this year.

The "Notice of the State Administration of Foreign Exchange on Further Promoting the Reform and Improvement of True Compliance Review of Foreign Exchange Management" issued in January this year clearly pointed out that the authenticity and compliance review of overseas direct investment should be strengthened. When a domestic institution handles overseas lending business, the total balance of overseas loans in local currency and overseas loans in foreign currency shall not exceed a maximum of 30% of the owner's equity in its audited financial statements for the previous year.

While Shanghai Film and Huahua Media's overseas layout is blocked, China Film, which has the Chinese character, is not afraid of difficulties and embarks on the road of overseas mergers and acquisitions.

On the evening of January 20, China Film (hereinafter referred to as "China Film") issued an announcement stating that its wholly-owned subsidiary, China Film Equipment Co., Ltd., plans to acquire a 15% stake in French YMAGIS by participating in private additional issuance and equity acquisition for no more than RMB 100 million.

In addition, China Film Corporation plans to invest US$15 million to conduct project investment cooperation with Universal Productions Co., Ltd. on "Speed and Passion 8".

In this regard, Zhao Xiaoma, executive director of CIC Zhuoshi Consulting, told a reporter from Times Weekly: "Currently, the capital accumulation of domestic film and television companies has reached a certain scale. However, the number of cultural industries that can choose to acquire in China is small, and the return on investment is low and it is difficult to preserve value. Therefore, powerful domestic film companies are more inclined to focus on more high-quality investment targets overseas."

"There is still no final conclusion on whether films produced by China film companies after acquiring overseas film and television companies should be recognized as 'China films.' However, with the emergence of a large number of 'co-productions' in recent years, it is easier for Chinese-funded overseas films to obtain more preferential policies. In terms of box office share ratio, co-productions shown in China can enjoy the treatment of domestic films, with a maximum share ratio of 43%. A Hollywood film enters China as an imported film. The producer ultimately gets only 25% of the box office."

Great Wall Film and Television temporarily eliminated overseas M & A targets.

In fact, before Zhongzou Film and Television Company held high the banner of M & A overseas, private film and television companies had already caused waves in the market.

In September, Kimi Pictures announced that it planned to invest 60 million euros to subscribe for approximately 27.89% of the shares of France's Europa Films.

The Internet film and television company that BAT joined is not willing to lag behind. Alibaba Pictures has made a lot of moves in overseas business since its establishment, and the most eye-catching thing is the announcement on October 9 last year that it would acquire a minority stake in Amblin and obtain a seat on the Amblin board of directors.

In fact, in the second half of 2015, Alibaba Pictures 'overseas layout accelerated. Jack Ma personally appointed Zhang Wei, who has a background in international media, as the person in charge of overseas business. His arrival also enabled Alibaba Pictures to develop overseas business rapidly, including cooperation with Paramount."Mission Impossible 5" and so on.

Although Alibaba Pictures and Paramount have reached a second cooperation on "Teenage Ninja Turtles 2" and "Star Trek 3: Beyond the Stars". But the result was that in the first half of 2016, Alibaba Pictures 'international business lost 48.94 million yuan.

Another giant, Wanda, was also caught in negative rumors of improper integration after acquiring Legendary Pictures.

On August 26 last year, Great Wall Film and Television announced that it planned to acquire a 65% stake in TippettStudio, the world's top special effects company, and raise matching funds. According to the announcement, the acquisition of TippetttStudio has been initially determined to be implemented in two steps, as follows: The first step is for Ligali to acquire the target assets held by the controlling shareholder of TippettStudio in cash.

However, on December 9 last year, Great Wall Film and Television, which had been suspended for nearly half a year, suddenly issued an announcement announcing that the transaction subject matter of its major asset reorganization had changed. TIPETTSTUDIOINC (referred to as "Tippet"), a post-film visual effects production company located in Berkeley, California, was no longer included in the scope of the acquisition.

It is worth noting that Great Wall Film and Television announced that it would abandon TIPPETTSTUDIO, just after the new rules for overseas mergers and acquisitions were introduced. It is not difficult to see from its subsequent announcements that the new regulations hinder the trading of overseas assets.

It was originally planned to acquire 80% of Tippit's equity, but so far it has not been filed and approved by the relevant competent authorities. Considering that overseas acquisitions involve many competent authorities for approval and filing, complex procedures, and greater uncertainty in time, TIPPETTSTUDIO was abandoned in order not to affect the overall progress of this major asset reorganization. "Great Wall Film and Television said in an announcement in December last year.

Many companies have terminated overseas acquisitions, but some companies have "boldly moved forward". At the end of last year, Tencent Pictures CEO Cheng Wu said in an interview that potential acquisition targets include companies in Hollywood, as well as companies in the fields of film creation and production. But so far, Tencent Pictures has not been exposed to any actual actions.

Editor: Nancy