Action! China Film reboots blockbuster IPO

China’s largest film distributor is moving ahead with an IPO it has been considering for more than a decade.

China Film Corporation plans to raise Rmb4.09 billion ($611 million) through a long-awaited initial public offering in Shanghai. It is poised to be the largest IPO in the nation’s cinema industry and the second-biggest Chinese A-share listing in any sector this year.

The company, which runs distribution for state-controlled China Film Group, is set to issue as many as 467 million new shares, or up to 25.01% of its enlarged share capital, according to a prospectus filed with the Shanghai Stock Exchange on Wednesday.

China Film initially planned to list in 2004 but postponed its IPO at least three times. The most recent attempt was put on hold last July when Chinese regulators suspended all IPOs in the wake of a stock market rout.  

The Beijing-based firm will run its investor education campaign from July 22 to July 25, set the issue price on July 26, and open both its institutional and retail books on July 28. It is expected to list in early August.

The company plans to use the proceeds of the deal to fund an expansion plan that includes the construction of 91 digital cinemas and the production of 53 films and 14 TV dramas. But it will also use some of the money to repay loans.

The film behemoth’s IPO comes at a time when the Chinese movie market is booming and domestic cinema firms have flocked to equity markets for fresh funding.

Official data showed ticket sales in China hit a record Rmb44 billion ($6.7 billion) last year, up 49% on 2014. Analysts at Nomura expect China to overtake North America as the world’s largest film market next year, with the Chinese box office tipped to reach Rmb100 billion ($15 billion) in 2020.

The deal would put China Film in a better position to compete against domestic rivals, such as Shenzhen-listed peers Huayi Brothers Media and Beijing English Media, which raised $176 million in 2009 and $222 million in 2011, respectively.

Property-to-entertainment conglomerate Dalian Wanda Group also listed its cinema unit in Shenzhen in January 2015. Wanda Cinema, the country’s biggest cinema operator, said in May that it also plans to acquire movie-making entity Wanda Media for Rmb37 billion in cash and shares.

China Film said it had distributed 790 domestic movies and 223 imported foreign movies over the last three years, taking up a 58% market share. As of the end of 2015, it controlled 99 cinemas and invested in another 13 in mainland China.

The company’s net profit reached Rmb868 million last year, up 76% year-on-year.

The long-anticipated deal, due to be launched next Thursday, could be the second-largest A-share IPO so far this year, after Bank of Jiangsu’s $1.1 billion flotation in June, according to data provider Dealogic. It will also be the biggest listing from the Chinese leisure and recreation industry, surpassing Hangzhou Songcheng Tourism Development’s $335 million flotation in 2010.

China Film’s state-owned parent, one of only two authorised importers of foreign movies into China along with Huaxia Distribution, will see its stake drop from 93% to 67% following the IPO, the company said.

Beijing-based broker China Securities is the sponsor of the transaction. 

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