China Media Capital, a state-backed investment fund, said it’s raising money from investors including WPP Plc (WPP), Time Warner Inc. (TWX:US) and Softbank Corp. (9984) to invest in Chinese media and entertainment companies.
China Media Capital is preparing a fund of a “few hundred million” U.S. dollars, Chairman Li Ruigang said in an interview in Shanghai March 20, declining to be more specific. WPP, the London-based world’s largest advertising company, confirmed the investment. The company will also be announcing two acquisitions in China next week, Chief Executive Officer Martin Sorrell said in a phone interview yesterday from Beijing.
Entertainment companies are seeking to tap demand in the world’s second-largest economy as consumer spending grows and incomes increase. Walt Disney Co. and DreamWorks Animation SKG Inc. (DWA:US) have formed partnerships in China where box-office receipts rose 36 percent to $2.7 billion in 2012, making it the biggest film market outside the U.S. and Canada. China Media Capital already counts DreamWorks, the studio behind the “Madagascar” films, and Time Warner as among its partners in China.
“In this country, you can see the population of the middle class, it is growing so fast,” Li said. “They want to spend money not only to buy luxury goods, they also want quality entertainment, quality content.”
China Media Capital started in 2009 with an initial fund size of 5 billion yuan ($803 million) from investors including China Development Bank Corp. The U.S. dollar fund’s investors also include Crown Resorts Ltd. Chairman James Packer and former Yahoo! Inc. co-founder Jerry Yang, Li said.
The fund currently owns a stake in Caixin Media Co., and was part of a group which purchased Rupert Murdoch’s 21st Century Fox Inc.’s minority stake in Star China TV in January.
Hiroe Kotera, a spokeswoman for Tokyo-based SoftBank, declined to comment. Mark Arbib, a spokesman for Packer’s Consolidated Press Holdings Ltd., could not immediately comment. Summer Wilkie, a New York-based spokeswoman, confirmed Time Warner’s investment in an e-mail, declining to reveal investment figures.
WPP will announce the China acquisitions on Monday and Tuesday, Sorrell said, declining to give specifics. The company will pay for them using a 400-million-pound ($660 million) fund which it sets aside for buyouts globally each year, he said.
“China is very rapidly becoming quite technologically advanced,” Sorrell said. The Asian nation is the company’s third-biggest market after the U.S. and U.K., he said.
China Media Capital’s new U.S. dollar fund will focus on investing in projects in television, radio, advertising and cinema space, Li said, after his company unveiled a 15 billion yuan entertainment center in Shanghai with DreamWorks and Hong Kong-based Lan Kwai Fong Holdings Ltd.
It will also invest in “lifestyle entertainment” such as Internet and mobile-phone projects, he said. Sorrell declined to say how much WPP had invested in China Media Capital’s new U.S. dollar fund. He said the typical size for such investments would exceed $10 million.
“This area has been restricted for a long time,” Li said, referring to China’s media and entertainment industry. “Potentially there is market demand out there. So if you have the expertise, if you can dig out those treasures in the market, you will win.”
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