"The Lost City of Z” co-producer Dale Johnson is back in China to raise money for a $200 million fund to finance independent Hollywood films just after some of the biggest China-Hollywood deals have fallen through.
Johnson said he expects to get at least $100 million for his Lynmar Media Fund from China-based investors, a sign that last year’s box-office sales slump and government pressure to limit outbound investment by Chinese hasn’t stymied demand for new projects linking Hollywood and the world’s second-biggest film market.
"There’s a great appetite in China for media content of a wide variety, especially new intellectual property,” Johnson said Tuesday in an interview at the Beijing International Film Festival. "Investing in new films is a smart way to get it. If you wait till later, you’ll end up in a bidding war, either overpaying or missing out.”
Potential investors include China-based film distributors and private equity funds, some with “strong alignments with state-owned companies,” said Johnson, founder of Lynmar Entertainment Group. Chinese authorities last year began warning against “irrational” overseas investments in industries such as entertainment and sports as part of a broader effort to limit the flow of yuan outside the country.
Johnson’s "Lost City of Z," a critically acclaimed film based on the real-life tale of a British explorer in the Amazon, opened in a handful of U.S. theaters last weekend and will expand in the coming days. His outlook for demand for investment in films not made by major Hollywood studios runs against a tide of pullbacks in mega-deals between Chinese and overseas companies.
After Chinese companies’ purchases of assets climbed to a record last year, 2017 deals are headed for their lowest levels since the financial crisis. Some transactions have even collapsed. Dalian Wanda Group Co.’s $1 billion acquisition of TV company Dick Clark Productions Inc. was called off last month, and a takeover of $4.6 billion movie maker MGM Holdings Inc. by Chinese buyers never even got off the ground.
Johnson, a Canadian national who has financed nine independent Hollywood films, said potential investors in the Lynmar Media Fund would be able to participate through funds they have already outside China. He said he may open an office in Beijing or Shanghai to expand his reach after traveling to China six times over the past year.
"We already have some commitments from China,” said Johnson, without naming any potential investors. “We anticipate at least half of that fund coming out of China. It could be even as much as the entire fund.”
Pressure from the government is drawing attention to potential deals involving Chinese companies that already have funds and assets amassed offshore not subject to the curbs.
The government’s warnings on “irrational” deals are unlikely to stop collaboration between China and Hollywood, said Bennett Pozil, executive vice president of East West Bank, a lender for some of the earliest and biggest China-Hollywood deals, such as Hunan TV’s $375 million investment in Lions Gate Entertainment Corp.
"For Chinese companies that are significant players in film and television, if there’s a strategic compelling investment they want to make offshore, either for co-production, or working with another studio, as long as the deal makes sense, they will find a way to get it done,” Pozil said in an interview on Tuesday in Beijing. “If companies are truly interested in building a relationship with China it’s going to be a long-term relationship. It’s not going to be what the regulation is today, or what the regulation is tomorrow.”