China's leading entertainment company Huayi Brothers Media Corp saw its share price rise to the daily limit Wednesday after it announced it would receive investment from Alibaba Group Holding and Tencent Holdings earlier on the day.
Shenzhen-listed Huayi resumed its stock trading Wednesday after a suspension starting from November 13, and its share price increased by the daily cap limit of 10 percent, closing at 25.85 yuan ($4.20) on Wednesday.
Huayi announced that it would raise 3.6 billion yuan by issuing 145 million shares in private placement, in which Tencent and Alibaba founder Jack Ma Yun's investment firm are set to invest 1.28 billion yuan and 1.53 billion yuan respectively, according to Huayi's filing on Wednesday.
After the share subscription, Ma's investment firm and Tencent will each have an 8.08 percent stake in Huayi, up from 4.03 percent and 4.86 percent respectively, and both will be the second-biggest shareholders in Huayi.
Huayi, which produces and distributes films, TV dramas and music, planned to spend 3.1 billion yuan in film and TV dramas production, and 500 million yuan to pay loans, the filing showed.
Compared with Huayi's gaming sector, the company is faced with decreasing income from films this year, and the financing plan shows Huayi's determination to refocus on its film business, Wei Huan, a research manager at Beijing-based entertainment industry consultancy Entgroup International Consulting, told the Global Times Wednesday.
Internet giants are expanding into the entertainment industry with their advantages including a large number of users, wealth of data from consumers as well as abundant capital, Huang Guofeng, an analyst with market research firm Analysys International, told the Global Times Wednesday.
Tencent will be the partner with priority when Huayi adapts its films and TV dramas to online games or online literature works, while Huayi will enjoy the same priority for the adaptation of Tencent's online game or literature works into films or TV shows, according to a statement Huayi released Wednesday on its Sina Weibo account.
Tencent's dominant position in gaming, online literature and music, combined with its large user base from its popular instant messaging software such as QQ and Wechat, means the company is capable of making progress in the film and television industries, Huang said.
Huayi and Tencent will also invest in and distribute five films together, Huayi said in the statement.
The cooperation of Alibaba and Huayi will be based on Alibaba's e-commerce platforms, including film promotion on taobao.com, according to Huayi.
Meanwhile, in the next three years, 10 of Huayi's films will attract public investment through Alibaba's online insurance management fund Yulebao, the statement said.
Alibaba has a large pool of users from its online shopping websites and payment tool Alipay, which can provide the best platform for Huayi in terms of film promotion and film derivatives sales, Wang Zhongjun, president of Huayi, was quoted as saying in the statement.
The film derivatives business is just starting in China and it curently only accounts for 20 percent of film revenue, Huang said, noting that as an e-commerce giant, Alibaba has a distinct advantage in the emerging business.
As a leading company in China's entertainment industry, Huayi's eye-catching cooperation with the Internet giants may push other counterparts to pursue similar alliances, according to Huang.
In addition to Tencent and Alibaba, Ping An Asset Management Co, a subsidiary of Ping An Insurance Group Co, will also purchase about 27 million shares in the private placement and obtain a 2 percent stake in Huayi, according to Huayi's filling.
With Ping An's expertise in the finance sector, Huayi will be able to develop its own online financing products that are similar to Yulebao, Huayi said in its statement.