IDG-backed Super Sports set for reverse merger in Hong Kong

Culturecom will fund the HK$3.87 billion ($498 million) purchase, which comprises HK$2.53 billion in cash and HK$1.33 billion in shares, by issuing HK$1.86 billion in new and ordinary and convertible shares plus HK$1.19 billion in convertible notes, according to a regulatory filing. The lead subscriber is an entity controlled by Jianguang Li, a partner at IDG.

Li's entity, IDG Fintech, will own between 26.38% and 27.61% of Culturecom, depending on how many rights on the convertible equities are exercised. It emerged that IDG Fintech might invest in Culturecom last July. There have since been various extensions to the exclusivity period and to whitewash waivers excusing the investor from making a mandatory general offer for all shares.

Super Sports is involved in the marketing and distribution of sports programs via broadcast channels and internet and mobile-related platforms. It was awarded exclusive rights to broadcast and distribute live Premier League matches in mainland China and Macau in 2010 and holds the contract through to the end of the 2018-2019 season.

Super Sports recorded $61.3 million in revenue for the year ended December 2015 and generated net cash from its operating activities of approximately $48 million. Most of this income derives from the sale of local rights to free-to-air broadcasters within China.

The two IDG funds invested in Super Sports are IDG-Accel China Growth Fund and IDG China Media Fund. The company is said to be a joint investment between IDG and Beijing-based New Yadii Media. Prior to 2010, IDG worked with Win TV to distribute Premier League matches. Super Sports' contract was renewed for a six-year term, starting from the 2013-2014 season. According to media reports, it paid around $120 million.

Monetizing the sport has so far proved easier in Hong Kong via subscription-only channels. Last year LeTV Sports - a spin-off from China-based Leshi Internet Information & Technology (LeTV), which started out as a video-streaming platform before getting into licensing and production - signed a three-year deal in the territory worth RMB2.52 billion ($386 million), twice what PCCW pays under the present agreement.

Nevertheless, others see huge potential in live sports coverage in mainland China as part of an increasing focus on paid-for media content delivered across multiple platforms. In October of last year, an entity controlled by CMC Capital Partners agreed to pay RMB8 billion for broadcast rights to the Chinese Super League over five years. Under the previous deal, CCTV paid about RMB45 million per year.

Media specialist CMC has made numerous investments in sport-related assets ranging from a stake in the company that owns Manchester City Football Club to Beijing-based sports marketing and management company SECA. Strategic investors are also getting involved, with Wanda Group and Alibaba Group among those making investments.

In addition to publishing comic books, Culturecom licenses out movie, mobile and merchandising rights to its content, and has also entered the 3D movie theater business. The company reported revenue of HK$24.9 million in 2015, down from HK$31.2 million the previous year. Its net losses narrowed to HK$120.2 million from HK$157.3 million.

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• Topics
• Greater China
• IPO
• Consumer
• Media
• IDG Capital Partners
• Hong Kong (China)
• Exit