Bona Film Group delists from U.S. but won't turn its back on Hollywood
The Bona Film Group was the first Chinese entertainment company to be listed on NASDAQ, a feat accomplished in 2010. Now, 17 years since its founding in 1999, the Beijing-based distributor and producer whose films include The Grandmaster, Flying Swords Of Dragon Gate, and the From Vegas To Macau series, has joined a growing number of Chinese companies that are delisting from U.S. indices.
The delisting was a long time coming and brought to a head amid a broad government-led campaign to distance China from foreign influence, but still was a difficult decision for Bona CEO Yu Dong.
“The idea to delist was like a seed,” Yu told local media last week. “It has been growing inside me for some years now, germinating and growing bigger and bigger.”
In December Yu joined a consortium to take Bona private with Alibaba Pictures, Sequoia Capital, and Fosun International. Other partners include Tencent affiliate Willow Investment, Fosun affiliate Orrick Investments, SAIF Partners, and All Gain Ventures.
Yu, a graduate of China’s prestigious Beijing Film Academy in movie production management, said that as early as 2010, Neil Shen, a Sequoia Capital general partner urged him to return Bona to the Chinese stock market.
“At that time, every entrepreneur was seeking their dream in America” Yu told China Business News last week. “I was quite reluctant to pull out of the United States, because it wasn’t easy to get in and we experienced accomplishments and setbacks every step of the way.”
But as competitors such as Huayi Brothers started to give them a run for their money, Yu’s decision to bring Bona’s business home to the cash-rich local market got a lot easier.
After five years on NASDAQ, Bona had managed only to raise $100 million, a sum Yu considered inadequate for a business that had invested in 60 films and constructed 30 movie theaters.
“Huayi’s total valuation was 13 times ours at the peak,” Yu told China Business News. “Local investors took no notice of Bona.”
Bona joins a growing number of Chinese companies seeking to privatize with an eye to listing again on a domestic bourse where, the thinking goes, local investors better understand their businesses. According to Yu, Bona will relist on China’s A-share market within three years.
Bona may be delisting from an American bourse, but it is not retreating from the American market, which still, for now, is larger at the box office than China’s.
The company has just finished setting up an office in Los Angeles, and will begin operations there in May, Li Peng, a Bona investor relations executive, told China Film Insider. CEO Yu has been visiting L.A. every three months to meet with entertainment industry executives.
Last November, Bona announced a $235 million investment in The Seelig Group (TSG Entertainment Finance), that netted it a slice of six 20th Century Fox productions, including The Martian, Independence Day 2, X-Men: Apocalypse, and War For The Planet Of The Apes. Bona got no China distribution rights and the Fox titles were treated as imports, subject to quotas and a limited share of the revenue.
In addition to investing in films such as The Martian, Bona also has put money into Ang Lee’s Billy Lynn’s Long Halftime Walk, co-financed with Jeff Robinov’s Fosun-backed Studio 8. An international version of Overheard, the Hong Kong crime thriller, is in an initial phase.
Overheard’s creators, Felix Chong and Alan Mak, are the same Hong Kong pair who made Infernal Affairs, which later was adapted by Martin Scorsese into The Departed. Bona CEO Yu is hoping the formula will work a second time around.
The six 20th Century Fox productions were chosen judiciously with returns in mind, Yu, who has the final say on Bona’s production investments, told local media.
“These investments were based on our rational judgment,” Yu said. “We invested in these particular films—we didn’t just go and buy their next 50 films.”
Chinese studios have started to pour money into Hollywood movie slates. Bona joins Beijing-based Perfect World Pictures, which in February announced a $500 million slate financing deal with Universal.
The Chinese companies are hoping to tap Hollywood’s expertise to create quality content they can feed back into a local market where box office figures have skyrocketed.
And as box office revenue has risen, so too have the number of cinema screens. Li told CFI that Bona will expand its infrastructure business to 100 cinemas and 800 screens over the next three years.
China currently has 31,627 screens to the roughly 39,000 that sit in North America. At its current growth rate, Yu expects China’s box office to be three times greater than North America’s in five to eight years.