Huayi Brothers suspends the acquisition of Hero Mutual Entertainment shares and says it will still deepen cooperation

on December 6, Huayi Brothers issued a notice saying that in order to protect the interests of the company and the broad masses of investors, the company's board of directors decided to terminate this major asset restructuring after careful study and applied to the Shenzhen Stock Exchange for the resumption of trading of the company's shares. The above major asset restructuring means that Huayi Brothers intends to acquire part of the shares of Beijing Hero Mutual Entertainment Technology Co., Ltd. by issuing shares.

on December 6, Huayi Brothers issued a notice saying that in order to protect the interests of the company and the broad masses of investors, the company's board of directors decided to terminate this major asset restructuring after careful study. And apply to the Shenzhen Stock Exchange for the resumption of trading of the company's shares.

the above major asset restructuring means that Huayi Brothers intends to acquire part of the shares of Beijing Hero Mutual Entertainment Technology Co., Ltd by issuing shares. On November 24, Huayi Brothers issued an announcement declaring the target company undergoing a major asset restructuring as "Hero Entertainment", which attracted the attention of the market. According to the announcement, the reason for the termination of the acquisition is: as the target company is a publicly listed company, the underlying assets involve a large number of shareholders, and the company and the other party of the transaction have negotiated many times, in the end, we failed to reach an agreement on the overall valuation of the underlying assets and the transaction price.

in view of the valuation gap between the two sides, some industry insiders said that according to the share price before the suspension, the market value of Hero Mutual has exceeded 15 billion, an increase of nearly 6 billion compared with Huayi Brothers' first acquisition of its shares a year ago. this should be the root cause of the inability to agree on the price between the two sides.

although the acquisition is temporarily terminated, there is still plenty of room for cooperation between the two sides. Based on the prediction that the Internet sports, especially the "Mobile e-sports" industry will enter an explosive period, Huayi Brothers is still optimistic about the high growth of hero entertainment. As its second largest shareholder, Huayi Brothers will continue to promote the pan-entertainment growth of hero entertainment. As a leading Internet sports company in China, Hero Mutual Entertainment has formed a high-growth business ecology around young consumers, including game research and operation, mobile e-sports events, VR content and marketing, VR events, sports life and so on. From the perspective of business linkage, many business chains such as e-sports games, competitions and derivatives owned by Hero Mutual can find more possibilities for cooperation in Huayi Brothers'"big entertainment ecosystem", including the mutual transformation or marketing cooperation between Hero Mutual Game IP and Huayi Brothers' film and television IP. Or the e-sports event line of the former can also be effectively docked with Huayi Brothers' real-scene entertainment projects and courtyard line business to open up resource sharing and strengthen business linkage.

at the same time, according to the announcement, the two sides do not rule out the possibility of continuing capital cooperation in accordance with the provisions of relevant laws and regulations in the future if the conditions are agreed. According to the performance of Hero Mutual Entertainment, we do not rule out the possibility that the new third board may turn to the board in the next few years, or independently carry out IPO in A-shares or other capital markets. Huayi Brothers, as the second largest shareholder with a 20% stake in Hero Mutual, will also share more development benefits.

like the two sides of a coin, although this reorganization ends because the price has not been agreed upon, on the other hand, it also reflects the accuracy and foresight of Huayi Brothers' investment in the field of Internet entertainment. In the past year, the market value of Hero Entertainment has not only rapidly increased by nearly 6 billion yuan, but has also begun to bring rich returns to investors with eye-catching performance. According to the announcement of the report for the third quarter of 2016 released on October 24 this year, Hero Mutual achieved a net profit of about 369 million yuan belonging to shareholders of the listed company from January to September, an increase of 2,151.76 percent over the same period last year. In 2016, Hero Mutual promised 500 million net profit to Huayi Brothers, which had completed more than 70% as of the third quarter.

as the first film and television company to enter the field of Internet entertainment, Huayi Brothers has launched a series of accurate investment layout in the field of Internet entertainment in recent years. whether it is the financial investment in Palm fun Technology in 2010, the strategic merger and acquisition of Yinhan Technology in 2013, or becoming the second largest shareholder of Mobile e-sports leading Hero Entertainment in 2015, or even the further acquisition which was terminated because the valuation could not be agreed. All reflect its clear investment logic: integrate the optimal resources and maximize the possibility of industrial coordination while pursuing the maximization of financial returns for the shareholders of listed companies. So far, Huayi Brothers has opened the complete chain of mobile games from R & D and operation, to distribution channels, and then to Mobile e-sports in its "Big Entertainment" layout, and has completed the basic construction of the linkage between movies and games. including the film and television adaptation of Yinhan's popular game "time Hunter" and other projects are under way.

in addition to the integration of domestic high-quality entertainment resources, Huayi Brothers' international vision has always been ahead of the industry. In 2015, Huayi Brothers joined Tencent to acquire Hong Kong listed company "China No. 9 Health" and renamed it "Huayi Tencent Entertainment". This means that Huayi Brothers, China's leading entertainment group, and Tencent, China's most influential Internet giant, will establish closer cooperation at home and abroad, with both capital and business in parallel to work together in the field of Internet entertainment. At present, Huayi Tencent Entertainment has become an important platform for overseas investment, mergers and acquisitions and overseas resources integration of Huayi Brothers. In March this year, Huayi Brothers invested in the South Korean HB company, which produced "you from the Star", which was operated through Huayi Tencent Entertainment. With the opening of the Shenzhen-Hong Kong Stock Connect on December 5, Huayi Brothers and Huayi Tencent Entertainment entered the first batch of targets of the Shenzhen Stock Exchange and the Hong Kong Stock Exchange respectively. Huayi Brothers also became the first integrated entertainment group in China to enter both Chinese mainland and Hong Kong's capital market. For Huayi Brothers, on the one hand, the launch of the Shenzhen-Hong Kong Stock Connect has opened up a new channel for it to enter the international capital market, thus getting the opportunity to introduce international capital; on the other hand, for Huayi Tencent Entertainment, it means having a bigger trading stage and the opportunity to get more capital assistance.

the entertainment industry has reached a consensus that unbounded integration has become a new trend for Chinese enterprises. Through continuous integration, new formats, products and experiences will be derived. The "Great Entertainment Ecology" being built by Huayi Brothers is also based on the same layout logic to promote collaboration and shared symbiosis inside and outside the industry in a variety of ways. Analysts believe that Huayi Brothers' big entertainment layout will attract more excellent partners, produce demonstration and chain effects, and create more possibilities for the integration and reshaping of the pan-entertainment industry.

Edit: yvette