Lionsgate Seals Film Finance & Distribution Deal With China’s Hunan TV – Update

By Ali Jaafar, Nancy Tartaglione

UPDATED, 8:01 PM: The deal is done. Lionsgate officially entered into a multiyear deal with China’s Hunan TV & Broadcast Intermediary for co-financing, distribution, development and production. Funding for the deal was provided by East West Bank and Bank of China. Read the full release below our original story.

PREVIOUSLY, January 28: Lionsgate is in advanced discussions with China’s Hunan TV, the country’s second largest broadcaster, to partner on film production and distribution. Reuters first reported the talks after Hunan TV made a statement on the Shenzhen stock exchange. We hear that Hunan would come in to provide financing on Lionsgate’s $1.5B slate over a three-year period.

We also understand that the companies are examining working together on local production and distribution in China, as well as a number of strategic TV initiatives. If the deal makes, it’s likely that the Hunger Games and Divergent franchises would not be involved. The stock exchange statement also said Lionsgate would help distribute Chinese films produced by Hunan TV internationally.

This marks the latest deal between Hollywood and China. Last year, Lionsgate refused to comment on reports that Alibaba was in talks to acquire a minority stake in the company. However, this deal is not expected to take the possibility of partnerships with other Chinese companies off the table. Lionsgate in fact already has a streaming deal with Alibaba and the company is believed to be keen to grow its presence in China.

The Hunan firm, which owns a film subsidiary in Hong Kong, also plans to launch its own U.S. operations.

Here is the release announcing the deal:

SANTA MONICA, CA, and CHANGSHA, CHINA, March 17, 2015 – Lionsgate (NYSE: LGF), a premier next generation global content leader, and Hunan TV & Broadcast Intermediary Co. Ltd. (Hunan) (SHE:000917), one of Chinas leading media and entertainment companies, have established a partnership that includes a multiyear slate co-financing deal covering qualifying Lionsgate feature films, the two companies announced today.  The agreement, which marks another step in Lionsgates continued growth into key markets around the world, was announced at a press conference today in Changsha, China, by Hunan TV & Broadcasting Chairman Qiu Yun Long and Lionsgate Chief Executive Officer Jon Feltheimer.

Under the terms of the agreement, Hunans wholly-owned TIK Films subsidiaries will co-finance all qualifying Lionsgate feature films annually for the next three years, including such eagerly-anticipated branded properties as the action-adventure film Gods of Egypt, an epic reimagining of ancient Egypt, Now You See Me 2, the sequel to Lionsgates 2013 global blockbuster which grossed more than $350 million at the worldwide box office, the supernatural action thriller The Last Witch Hunter, starring Vin Diesel, the critically-acclaimed thriller Sicario and the romantic thriller Age of Adaline, starring Blake Lively and Harrison Ford.

TIK Films, in partnership with LEOMUS Pictures, also has the option to distribute up to four of the co-financed films each year in China.  In addition, Lionsgate, TIK and LEOMUS are already planning several feature film co-development and co-production projects in China. LEOMUS recently distributed the hit films Now You See Me and Escape Plan from Lionsgates Summit Entertainment label in China, where Escape Plan grossed more at the box office ($42 million) than it did in North America.

“Were delighted to expand our relationship with one of the pre-eminent entertainment brands in China to build our film and television presence in that territory as well as to explore opportunities around the world,” said Mr. Feltheimer. “This agreement reflects our strategy of teaming with entrepreneurial partners to expand our global operations in key markets while underscoring our commitment to a business model that mitigates risk.”

“Were thrilled to partner with Lionsgate, an innovative and forward-looking company that has emerged as a major creative force in the global marketplace,” said Mr. Long.  “We look forward to joining hands in creating a feature film pipeline filled with some of the most commercially exciting movies in the world as well as exploring other strategic opportunities throughout our complementary film and television businesses.”

Lionsgate is working with Hunan CATV Network Group Co., LTD., a subsidiary company of Hunan TV & Broadcast, which reaches over 15 million subscribers. Lionsgate is cooperating with major shareholder Hunan TV, the second most watched broadcaster in China, to explore opportunities for Hunan series outside China.

The deal was orchestrated together by the Lionsgate and Hunan TV team that includes Co-Chief Operating Officer Brian Goldsmith, Lionsgate Motion Picture Group Co-Chair Patrick Wachsberger, Executive Vice President, International Sales Wendy Reeds, General Counsel & Chief Strategic Officer Wayne Levin, Deputy General Counsel David Friedman, Bruce Tobey of OMelveny & Myers, Hunan TV & Broadcast Vice President Liu Shabai, TIK Executive Manager Eric Rong, LEOMUS CEO Qiu Jie, and Schuyler Moore of Stroock & Stroock & Lavan LLP.

Financing for the deal was provided by East West Bank and Bank of China.

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