FountainVest, CMC-backed IMAX China files for HK IPO
The China business of movie theater operator IMAX, in which FountainVest Partners and CMC Capital Partners acquired a 20% stake just over a year ago, has filed for an IPO in Hong Kong.
The company has made an initial filing but has yet to provide details on the size and pricing of the offering. FountainVest and CMC each own 10%, having invested $80 million at a valuation of $400 million. The balance is held by IMAX Corporation.
The parent company decided to seek external investors because of how its business has evolved. It has gone from a straight equipment retail model to revenue-sharing model with cinema operators, whereby it defers a portion of the up-front payment for a share of box office revenues from the screens. Capital and a familiarity with the local regulatory environment was required to sustain this approach.
FountainVest led the transaction and brought in CMC because it has particular experience in this field. It claims to be China's first media and entertainment-focused private equity fund approved by the National Development and Reform Commission, and has a string of state-owned enterprise backers. Ruigang Li, CMC's chairman, is the former president of Shanghai Media Group.
Greater China is IMAX's fastest-growing market. The company opened its first theater in the country in 2011 and had a total of 173 in operation as of December 2013. This rose to 234 by the end of 2014 and 239 as of March 2015. It has an additional 219 theater systems in its backlog.
IMAX's China theater business - licensing theater systems and related services to partner movie theaters for a combination of up-front fees and revenue-sharing agreements - accounted for 76.2% of total revenue in 2014. The rest came from digital re-mastering Hollywood and Chinese language films into the IMAX format. The company receives a fixed percentage of the resulting box office receipts.
China is the world's second-largest movie market after North America, with ticket sales rising 36% year-on-year to RMB29.6 billion ($4.7 billion) in 2014. Chinese language films enjoyed the largest market share, with 55%. Four of the five highest-grossing films were released IMAX format but Chinese language movies only accounted for 15.2% of total IMAX box office sales. The company expects to grow in this area.
IMAX China's largest customer is Wanda Cinema, the biggest exhibitor globally. The companies have an agreement that will see 210 IMAX theater systems - representing 46.6% of the company's backlog - installed in Wanda-owned theaters. Wanda contributed 23% of IMAX China's revenue in 2014.
Revenue came to $78.2 million in the 2014, up from $55.9 million the previous year. Net profit increased from $17.4 million to $22.7 million over the same period.
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