PE-backed IMAX China raises $248m in Hong Kong IPO

The company sold 62 million shares at HK$31.00 per share, according to a regulatory filing, although the size of the offering could increase if underwriters exercise the overallotment option. FountainVest Partners and CMC Capital Partners together exited 11 million shares - realizing HK$341 million - and will hold stakes of 6.4% apiece once IMAX China goes public.

Parent company IMAX Corporation will see its shareholding fall from 80% to 69.8% after selling 22 million shares. Five cornerstone investors covered $55 million of the offering.

The relatively modest pricing - the target range was HK$29.80-34.50 - reflects the challenging market conditions in Hong Kong. Private equity-backed companies have raised $15.9 billion through IPOs on the bourse so far this year, compared to $18.5 billion for 2014 as a whole. However, the number of offerings is down by half at 17, and 15 of these were completed before mid-July.

IMAX China, which is scheduled to begin trading on October 8, generates three quarters of its revenue from licensing theater systems and related services to partner movie theaters for a combination of up-front fees and revenue-sharing agreements. The rest comes from digitally re-mastering Hollywood and Chinese language films into the IMAX format.

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 251 as of June 2015. It has an additional 217 theater systems in its backlog.

The proceeds of the offering will be used to buy theater systems and cover one-time launch costs as IMAX China expands its revenue-sharing model, whereby it defers a portion of the up-front payment for a share of box office revenues from the cinema operator. The company will also build up its inventory by purchasing theater systems from IMAX Corporation.

Around 15% of the proceeds have been earmarked for potential complementary investments, including working with third parties to establish a film fund. IMAX Corporation and CMC have already agreed to launch a fund that will bankroll at least 10 Chinese-language movie productions. A number of other investors have also set up China-focused film funds.

FountainVest and CMC jointly acquired 20% of IMAX China for $80 million, at a valuation of $400 million, last year. IMAX Corporation decided to seek external investors that are familiar with the local regulatory environment. FountainVest led the transaction and brought in CMC because it has particular experience in this field.

IMAX China generated revenue of $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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• Topics
• Exits
• Media
• Greater China
• Technology
• China
• Fountainvest Partners
• IPO
• Media
• China Media Capital
• Exit