Imax To Acquire Full Control Of China Subsidiary In $124M Deal
Imax Corp. is planning to acquire full control of its China subsidiary, the company announced Wednesday.
A proposal has been filed for Imax to acquire the outstanding 96.3 million shares in Imax China, a subsidiary that went public on the Hong Kong stock exchange in 2015. The company is paying roughly HK$10 per share in cash, or $124 million.
In a press release, Imax said its proposal represents about a 49% premium to the the 30-trading day average closing price of Imax China.
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Imax said the deal will provide an immediate financial boost upon its close, providing operational efficiencies and letting the company pursue new growth opportunities and leverage Imax technology in China. Imax plans to finance the transaction in full, either through internal cash resources or external debt financing, or possibly a combination of the two.
During a conference call with Wall Street analysts on Wednesday evening, Imax CEO Rich Gelfond addressed the timing and rationale for the proposed deal. “The capital markets in China have not really appreciated the Imax China story,” he said. “The sector is down, the volume is very low. We used to have 15 analysts that covered us. We now have three analysts that cover us. We just looked at all the factors … and we concluded that this was the right time to do it.”
In a press release, Gelfond said being a publicly traded subsidiary enabled Imax China to enjoy a period of “tremendous growth,” and he said the acquisition “has the potential to usher in a new era of expansion for our brand and technology in this thriving market for entertainment.”
The first commercial Imax location opened in China in 2007 and Imax China was established as a subsidiary of Imax Corp. in 2011. Imax China attracted financial partners in the market, among them Wanda, and sold 20% of the business in 2014 just prior to the Hong Kong IPO. Today, there are more than 770 IMAX commercial locations in Greater China, most of any global territory.
While Covid has remained a concern in China, Imax’s business in the territory has been a financial pillar as the company has emerged from the pandemic even though just 1% of the country’s screens are Imax. The first quarter of 2023 saw the highest-grossing first quarter ever for global box office from Imax screens, fueled by the highest-grossing Chinese New Year in history, leading to the company’s highest grossing quarter ever for local language films. The company continues to offer a diverse mix of Hollywood and local language blockbusters across its Chinese network. A greater number of Hollywood films are securing release dates in China. According to online ticketing outlet Maoyan, 26 U.S. films have been approved for release in China in 2023 to date, versus 25 for the entirety of 2022.
After the deal closes, Daniel Manwaring will continue as Imax China CEO, reporting to Gelfond and overseeing all local business functions, which include distribution, marketing, finance and additional areas focused on the company’s business interests in China. Imax China will remain headquartered in Shanghai, with offices in Beijing.
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