Deal focus: IDG, CEL play movie industry long game

With China's film industry on the cusp of overtaking North America as the world's largest, investors increasingly recognize that importing cinematic skills from more developed markets will be critical to sustaining growth. China Everbright (CEL) and IDG Capital Partners are demonstrating this forethought with a Chinese film investment at the educational level.

Through the IDG-Everbright M&A Investment Fund, which was launched earlier this year with a target corpus of RMB20 billion ($3 billion), they will buy a controlling stake in Shanghai Film Art Academy for an undisclosed sum, with plans to construct a related film and television institute aimed at nurturing the local industry.

The effort will include intellectual property incubation, building high-tech movie studios, talent promotion and acquiring independent Hollywood film companies, post-production companies and special effects teams. Foreign expertise will also come through a parallel investment that will give the academy rights to host the Venice Film Festival's Asia Pacific unit for a period of five years. Established in 1932, the Venice festival is the oldest events of its kind in the world.

IDG and Everbright's patient, industry-building strategy stands in contrast to most of China's cross-border film investment to date, which has focused on the short-term profits related to co-investing in overseas production companies or securing promotional rights for local screenings of foreign movies.

"The fund will work closely with premium film companies and schools in Europe, which will help consolidate the entire film industry chain," says a spokesperson for CEL, which is also ushering the academy into a strategic partnership with ANICA, Italy's film industry association. "International outreach is an important part of the fund strategy in investing in China's growing film industry."

That growing industry was marked by a record $6.8 billion in revenue last year, according to Chinese government data. This represents a 49% lift from 2014 and compares to a mere 6% year-on-year growth rate for the US industry, which hit a record $11 billion in box office receipts during the year.

Established in 2003, Shanghai Film Art Academy offers 15 specialist fields such as film art, animation games and digital design to about 3,000 students. Although government-approved, it remains one of only two independent educational institutions in China dedicated to the study of film. This independent status is expected to facilitate a unique synergy with the government ties of state-controlled CEL as the school seeks to expand its talent pool by internationalizing its campus.

"The academy has great brand value and scarcity, which will attract international and industrial resources," the CEL spokesperson adds. "It will benefit from the fund's background of state ownership and cross-border asset management."

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• Topics
• Greater China
• Buyouts
• Media
• China
• China Everbright
• IDG Capital Partners