January 5, 2020
Home entertainment distributor Cinedigm has signed a stock purchase to acquire about 29% of Chinese entertainment company Starrise Media Holdings Limited. In exchange for the stake, Cinedigm is giving a total of 54,850,103 shares of Class A Common Stock worth about $44.5 million. The company expects to close the acquisition in the first quarter.
Cinedigm, which is majority-owned by Hong Kong based investment firm Bison Holding Co., says the deal would help its presence and leverage in both the Chinese and North American markets.
“These are the two biggest entertainment markets in the world,” Chris McGurk, CEO of Cinedigm, said in a statement. “Following the close of this transaction, Cinedigm will be uniquely well positioned to grow our content distribution and OTT streaming businesses in both key territories.”
The company expects to obtain the approval of the acquisition by a majority stockholders, in addition to any regulatory issues — the latter no small matter in today’s hyper-charged trade environment between the Trump Administration and China.
“This proposed transaction is a strong additional measure of support for Cinedigm by Bison Capital, our largest shareholder,” said CEO Gary Loffredo. “We look forward to working with Bison to identify additional opportunities to build our business, particularly in the fast growing AVOD OTT streaming segment as well as further strengthening our balance sheet.”
Cinedigm has already been working with Bison to develop strategies and forge partnerships to release entertainment content and develop OTT channels in China while, reciprocally, releasing Chinese content and new OTT channels in North America, such as the recently launched Chinese language content channel, Bambu.
In calendar year 2018, Starrise reported about $139 million in total revenue and gross profit of $31 million, a 97% increase from 2017 revenue and 196% increase in gross profit. In the first half of calendar year 2019, the Starrise reported revenue of about $67 million and gross profit of $19 million, a 11% increase in revenue and 104% increase in gross profit.
Starrise’s film/TV business segment mainly invests in film, television and other short-form content. It distributes film content theatrically and to all key media platforms in China and is committed to significantly growing its investment in entertainment content for the rapidly expanding Chinese theatrical and digital marketplaces.
Recent prominent film investments by Starrise include The Wandering Earth, one of the most successful Chinese films ever released, generating almost $700 million at the box office in China in 2019 and The Grandmaster of Kung Fu, a successful Internet-released action movie.