PE-backed STX Entertainment files for Hong Kong IPO

No indication is given in the prospectus as to the size and pricing of the offering. The proceeds have been earmarked for M&A in China to develop production and distribution capabilities and to acquire content as well as larger equity contributions to films once a co-financing arrangement with China’s Huayi Brothers Media expires.

STX was founded in 2011 as a mid-budget filmmaker by Hollywood producer Robert Simonds and Bill McGlashan, managing partner of TPG Growth. The company received Series B funding in 2014 from Hony and DNS Venture Partners, and released its first feature film – “The Gift” – the following year. Hony then introduced STX to Huayi, resulting in a three-year deal under which the Chinese group co-funded, co-financed and co-distributed almost all STX’s movies.

Between 2016 and 2018, STX completed a Series C round worth approximately $94 million, with contributions from new investors such as Tencent Holdings, Hong Kong pay-tv service provider PCCW, and media conglomerate Liberty Global. Tencent and PCCW both signed distribution agreements with the company at the same time.

TPG currently holds a 32% interest in STX, while Hony has 22.6% and DNS has 10.9%. The Series C investors between them own 6.5%, which includes stakes of 2.3% and 0.5% for PCCW and Tencent, respectively.

The company has released 23 films to date – among them “Molly’s Game” and “All the Money in the World,” which came out last year – and has a further 13 in its pipeline. From 2019 onwards, it expects to release or distribute 12-15 films per year. STX is also responsible for several Sino-US co-productions, including “The Foreigner,” a Jackie Chan movie that posted global box office receipts exceeding $145 million.

STX targets films with budgets of $20-80 million that will release on at least 2,000 screens in the US and have potential for wide global distribution. On the television side, the company seeks to generate revenue from production services fees and licensing. It is willing to foot production budgets of $2.5-4.5 million per episode.

The company expects to benefit from exposure to the two leading markets for box office receipts globally, with the US and China together accounting for an estimated $18.7 billion out of a global pot of $39.9 billion in 2017. Meanwhile, China’s video-on-demand market was worth $14.9 billion last year, compared to $22.8 billion in the US. This was 70% of the worldwide total.

STX recorded revenue of $202.6 million last year, up from $185.2 million in 2016, with films responsible for approximately 97%. Over the same period, the company’s losses widened from $272.8 million to $408.6 million.

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• Topics
• Greater China
• Media
• IPO
• North America
• China
• USA
• Hony Capital
• TPG Capital