IMAX to Sell 20% Stake in Its Chinese Business
By The Wall Street Journal: Laurie Burkitt on April 08, 2014
BEIJING—IMAX Corp. plans to sell a 20% stake in its Chinese business to two China-focused investor groups in an $80 million deal that the big-movie-screen operator hopes will pave the way for expansion and an eventual public listing.
IMAX Chief Executive Richard Gelfond said in an interview that investment fund China Media Capital and private-equity firm FountainVest Partners would pay $40 million each for 10% stakes by early 2015. He said the deal gives IMAX local partners who will open up expansion opportunities in one of its most important markets.
The investors will shepherd a public offering of shares of the China operation, IMAX China Holding Inc., in the next five years, Mr. Gelfond said. IMAX China will be paying IMAX Corp. an ongoing trademark and licensing fee for the right to use the IMAX trademark in China, a spokeswoman said.
IMAX China is aiming to list in Hong Kong but will be positioning itself to list on other China exchanges, such as in Shanghai, in case that doesn't work out or a better opportunity arises on the mainland, a spokeswoman said.
Mr. Gelfond said an IPO will enable IMAX to increase the number of screens it runs across China beyond its current 150. The company also has aspirations outside of the theater and is planning to sell by 2015 IMAX at-home theater units made with a television maker.
China is a critical growth market for IMAX and is set to become the company's largest market, as it plans to open more than 237 screens in the next five years, adding to its current 173. In North America, IMAX currently runs 340 screens.
Ticket prices to see movies on the giant IMAX screens vary by location in China, a spokeswoman said, noting that prices are higher in China's largest cities. In Beijing they cost as much as 150 yuan, or roughly $24.
The broader film industry projects big growth in China, where total box-office revenue in the first quarter of 2014 climbed 30% to 6.7 billion yuan, or $1.08 billion, from the same period a year earlier, according to Beijing-based film research company EntGroup.
IMAX's revenue in China last year grew 26% to $56.5 million from 2012. That compares to North America, where IMAX revenue dropped 6.5% to $136.2 million last year. The company's global revenue rose 1.8% to $287.9 million in 2013.
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