Hollywood producers Robert Simonds and Gigi Pritzker are building a new movie studio with a Chinese private-equity firm and an arm of U.S. buyout firm TPG Capital, planning to spend $1 billion in the next five years.
Hony Capital Ltd. is the anchor investor in the as-yet unnamed studio, which the partners said in a statement yesterday will make eight to 10 “star-driven, mid-budget films” a year and target the global market, including China.
“Seismic shifts in the entertainment industry have produced exciting new opportunities in content, production and distribution,” Simonds, whose credits include the Adam Sandler comedies “Big Daddy” and “The Waterboy,” said in the statement. He will be chairman and chief executive officer. Pritzker, whose Oddlot Entertainment produced the films “Ender’s Game” and “Drive,” will be on the board.
The deal is the latest example of Chinese investors’ interest in the U.S. film industry, just as the country’s movie market has surpassed Japan as the second biggest in the world. This month, a group led by Huayi Brothers Media Corp. agreed to invest as much as $150 million in a studio founded by Warner Bros. Pictures ex-president Jeff Robinov. In 2012, Dalian Wanda Group Co., operator of China’s largest theater chain, bought exhibitor AMC Entertainment Holdings Inc. for $2.6 billion including debt.
“We are uniquely positioned to successfully partner with traditional distributors in North America, expand in the vast Chinese market, and capitalize on new, still developing digital channels,” Simonds said.
The studio plans to finance, produce and distribute 10 films per year, targeting the mid-budget film market that studios have pulled back from in favor of so-called tentpole movies with the biggest production investments.
As part of the deal, the studio has has direct distribution agreements with the largest North American theater chains, including No. 1 Regal Entertainment Group (RGC:US), No. 2 AMC Entertainment (AMC:US), Cinemark Holdings Inc. and Carmike Cinemas Inc. The arrangement should ensure wide release of the new studio’s films. AMC Holdings and is controlled by Wang Jianlin, China’s second-richest man with a net worth of $13.9 billion, according to the Bloomberg Billionaires Index.
A growing international demand for films has helped buoy the U.S. film industry in recent years. The Chinese box-office rose by about one-third in 2012, to $2.7 billion, overtaking Japan as the second-largest global market, according to statistics from the Motion Picture Association of America. From 2008 to 2012, the global box office rose by about one-fourth to $34.7 billion, with most of the growth coming from outside the U.S. and Canada.
Management of the new studio will include Chief Operating Officer Thomas McGrath, former chief of Viacom Entertainment. Board members include David Bonderman, founding partner of TPG, and Frank Biondi, a former president and CEO of Viacom Inc. and a former chairman and CEO of Universal Studios. The studio was founded about 2 1/2 years ago by Simonds and TPG Growth, the midmarket investing arm of Fort Worth, Texas-based TPG.
Hony Capital, backed by Legend Holdings Ltd., the largest shareholder in computer maker Lenovo Group Ltd., has agreed a strategic partnership for film and television production with SMG Pictures, a studio backed by China’s largest entertainment conglomerates, according to the statement. Additional equity and debt are being provided by the business interests of Pritzker.
Senior debt financing for the studio was underwritten by JPMorgan Chase & Co. and Bank of America Corp. Raine Group LLC served as exclusive financial adviser to the studio.
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