Huayi Brothers International Investment Limited, a unit of the privately-owned Chinese film group Huayi Brothers Media Corp, will take a leading 79.0% share in GDC Technology, a leading global digital cinema technology solutions provider. Huayi formerly held an 11.99% stake in GDC Technology after first acquiring a 9.0% share for $20.92m back in April 2013 from CAG Digital Investment Holdings. Huayi Brothers, through its international investment arm, is reportedly paying up to $125m for the stake, including some $67m through a share issue. The development will see Huayi acquire the shares in GDC previously owned by private equity funds Carlyle Asia Growth Partners, Yunfeng Investment, and Mighty Capital.
Move comes as Huayi Brothers announced it would invest $130m in a new subsidiary in the US. The new company will handle investment, production, distribution and promotion of films and TV content. It would also be used for further merger and acquisition opportunities. Huayi Brothers is one of the largest privately owned film groups in China.
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Our analysis The move brings one of the largest d-cinema equipment and services firms under Chinese ownership. GDC, headquarted in Hong Kong, supplies digital cinema servers, IMBs and other theatre management systems to cinemas globally. Of the server market alone, GDC had an approximately 25.0% share of the world market as at H1 2014, according to IHS data. GDC also set up a VPF led initiative for enabling roll out of digital cinema in Asia, but also more recently with exhibitor clients in Latin America. For Huayi Brothers this represents a further step on the road to growing internationalisation of the film group. The investment also comes at a time when the industry is in the very final stages of digitisation with over 89.0% of screens converted worldwide as at H1 2014 according to IHS data (including India) and as attention is turning towards streamlining processes through technology. Coupled with the major investment for a new direct subsidiary for Huayi in the US, the investment signals a clear intention to become a major player and investor in the global film business. In 2011, the company acquired a strategic stake in China Lion film group in the US jointly with Bona Film. |
