Alibaba, Tencent join PE-backed group to take Bona Film private

The deal values the US-listed company at approximately $1 billion. According to a filing, an investment vehicle called Mountain Tiger International will pay $13.70 apiece for all outstanding American Depositary Shares (ADS). This represents a 6.5% premium to the June 11 closing price, the last trading day before the take-private proposal emerged.

Those backing the deal include Alibaba Pictures Group, Tencent-owned Willow Investment, Uranus Connection and All Gain Ventures. Hong Kong-listed Alibaba Pictures said in a separate filing that it will invest about $86 million on its own.

Dong Yu, Bona's founder, chairman and CEO, will roll over his shares into the deal, alongside Fosun International, Sequoia Capital and SAIF Partners. They hold a 62% stake between them. Rollover financing will come to $634 million, with a further $366 million in new equity financing.

In June, Sequoia, Fosun announced they would support a founder-led take-private offer for Bona Film. The proposed price was $13.70 per share.

Sequoia first backed Bona in 2007 and was one of three VC investors - alongside Matrix Partners and SIG - disclosed in the prospectus when the company went public in late 2010, raising approximately $100 million. Fosun bought a 6.4% stake in the company from Matrix Partners China and other undisclosed pre-IPO shareholders in 2013 for $20.8 million.

Last year, the Chinese conglomerate agreed to purchase another 13.3% for $49 million. It acquired the interest from Yu, who wanted to fund his acquisition of 21st Century Fox's entire 19.3% holding in Bona. An affiliate of Fox invested in the company in 2012 and they had five co-productions in the works at the time of Fox's exit, including a Chinese-language remake of "Bride Wars."

As of April, Yu held a 30.13% stake in Bona, while Fosun and Sequoia owned 19.27% and 5.24%, respectively. Other investors include SIG Asia Investment and SAIF Partners with 6.33% and 7.49%.

Bona is involved in the production and distribution. The company distributes approximately 15 films each year. It distributed or invested in 202 features between 2003 and 2014, operating through a network that covers Greater China, South Korea, Southeast Asia, the US and Europe. There is a co-production agreement with Universal Studios and Working Title Films in addition to Fox.

Bona owned and operated 25 movie theaters in 15 Chinese cities as of December 2014 and it also has a talent agency business. Revenue came to $254.1 million in 2014, up from $149.3 million the previous year, while net income rose from $4.5 million to $5.8 million over the same period.

Alibaba Pictures was created last year when Alibaba bought 60% of Hong Kong-listed ChinaVision and renamed it. The film and entertainment unit announced in June that it plans to raise HK$12.1 billion ($1.56 billion) via a share placement to help finance potential acquisitions in the media industry.

Both Alibaba and Tencent are seeking to create media value chains that run the full gamut from content creation to distribution. Mostly recently, Chinese film studio Huayi Brothers, Tencent and Yunfeng Capital - a PE firm co-founded by Alibaba's Jack Ma - acquired a Hong Kong-listed shell company to develop films for local and international market.

The Bona Film deal, which is subject to various closing conditions include approval by shareholders, is expected to close during the second quarter of 2016.

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• Topics
• Greater China
• Media
• Buyouts
• China
• Media
• Alibaba Group
• Tencent
• buyout
• Fosun Group
• Sequoia Capital