This article is looking for Chinese original creation
Reporter / Wan Hao
Editor / Zhao Li
After the unsuccessful listing of Xinli Media, it turned and turned to the embrace of reading. On the evening of August 13, the Reading Group announced that it would acquire Xinli Media at a price of no more than RMB 15.5 billion and settle it by means of a combination of cash and new shares. Among them, the reading group will pay 5.29 billion yuan to Tencent, the settlement method is shares, Xinli Media management is 10.21 billion yuan, with 50% cash and 50% shares.
The two parties agreed that the existing management team of Xinli Media will continue to be responsible for the TV drama network drama and film production business, and has the right to select original content, including selecting materials from platforms other than the text. At the same time, Xinli Media will contact the reading library's content library, writer platform and editorial team.
Xinli Media and the reading of the text, first of all can produce business synergy, and secondly can alleviate its financial pressure. For the text, “the acquisition of Xinli is a scarce opportunity to extend its content strength downstream, so that the text can further penetrate the IP value chain and optimize the services provided to writers and users. We believe that this alliance will create important long-term strategic value for the readers,” said Liang Xiaodong, CEO of Reading Group.
Xinli Media listed roads twists and turns
Founded in 2007, Sunray Media is principally engaged in the production and distribution of TV dramas, online dramas and movies. The works produced by the series include "My First Half Life", "Yu Sin", "Little Husband", etc., and participated in the production of films such as "Charlotte Trouble", "Shameful Iron Fist", "Love St." and so on.
Xinli Media's prospectus and related performance announcements revealed that operating income from 2014 to 2016 was 650 million yuan, 660 million yuan, and 750 million yuan respectively, and profits were 180 million yuan, 160 million yuan, and 210 million yuan. According to the announcement of the Reading Group, Xinli Media's profit before tax in 2017 was 420 million yuan.
In terms of revenue, Xinli Media is not eye-catching in a group of companies. According to public information, the net profit of A-share listed companies Huace Film, Ciwen Media and Tangde Film and Television in 2017 was 632 million. Yuan, 428 million yuan, 213 million yuan.
The data that can be referenced is that at present, the market value of Huace Film, Tsing Wen Media and Tang De Film and Television is 16.59 billion yuan, 6.103 billion yuan and 3.672 billion yuan respectively.
Therefore, the reading group bought a total of RMB 15.5 billion, which is a very “cost-effective” business for Xinli Media.
Before joining the article, Xinli Media has been seeking listing. In 2012, Xinli Media entered the IPO preliminary review and terminated its application in January 2014. It was terminated after applying for an IPO again in November 2015. On June 30, 2017, Xinli Media submitted its prospectus to the Securities Regulatory Commission for the third time.
Why is the listing of Xinli Media repeatedly blocked? Some analysts believe that Xinli Media has equity holdings, peer-to-peer competition with major shareholders, and related transactions, as well as problems in the company's operating cash flow.
Previously, Light Media, as the second largest shareholder of Xinli Media, has always had a competitive relationship with it. The Xinli Media prospectus also shows that Light Media is one of the competitors. For example, in 2015, Xinli Media invested in "Charlotte Troubles" and the "Hong Kong" of the light media had met the National Day.
In terms of cash flow, Xinli Media has been “stretched”. The cash flow in 2012 and 2013 was negative. The cash flow in 2014 was RMB 246,390,000. From the end of 2016, the monetary funds were only RMB 278 million. At the same time, Xinli Media's debt ratio has been rising steadily, with its asset ratios from 2016 to 2017 being 52.31%, 61.13% and 70% respectively.
Before the sale, Tencent had a "marriage"
According to public information, the Reading Group was established in 2015. It is a combination of Tencent Literature and the original Shanda Literature. It is an online digital reading platform and a literary IP nurturing platform. The Reading Group has a series of content brand matrices, including: Genesis Chinese. Net, starting Chinese network, red sleeves and other incense. In November 2017, the Reading Group was listed on the Hong Kong Stock Exchange and Tencent was the controlling shareholder.
Xinli Media and Tencent have long had a "marriage". On the evening of March 11, Light Media announced that it would sell 27.6420% of its shares in Xinli Media to Linzhi Tencent for 313.704 million yuan. After the transaction, together with Tencent's 4.0-share stake in Xinli Media, Tencent held a 31.72% stake in Xinli Media, its second largest shareholder.
After the above transaction, Cao Huayi, chairman of Xinli Media, made it clear that he would give up the IPO. According to the 21st Century Business Herald, Sun Meng, director of Xiangxi Capital, said that Xinli Media has given up IPOs for two reasons: the regulatory trend is not good for the IPO of film and television companies, and Tencent is not bad, it can give Xinli Media sufficient funds. stand by.
Xinli Media also said in its prospectus that its two major problems are that the financial strength is not strong and the company's brand awareness is not enough. Tencent's blessing can solve the above problems.
“The financial strength is a key factor in determining the market competitiveness of film and television production enterprises. Some domestic private film and television production organizations have strong financial strength through listing financing or absorbing investment from venture institutions. In contrast, the company's issuer's financial strength is not strong, although the company has a certain advantage in the industry with its rich operational experience and production capabilities. Status, but limited financial strength still limits the company's production capacity and is relatively disadvantageous in the competition," the prospectus said.
The Ping An Securities Research Report pointed out that for the Reading Group, other competing products such as TV, movies, offline entertainment, shopping, games, news and other information are competing for users' time and occupying the time of traditional reading. And IP development has some uncertainty. According to Quest mobile, the growth rate of MAU in the online reading industry dropped from 20% at the end of 2016 to 11% at the end of 2017, and online reading penetration did not increase at 23.4% in 2017. The market user size is basically saturated.
Some analysts believe that there is limited room for online reading business growth, IP incubation or future direction. In the 2018 semi-annual performance report, the Reading Group stated that it has adapted the rich copyrights of literary works into other forms of entertainment (such as film and television dramas, animations and comics).
The advantage of Xinli Media lies in the output capability of its high-quality film and television drama content, which can be synergistic with the business of the Reading Group. Xinli Media's 2017 prospectus shows that the cumulative price of TV dramas that have been sold since 2013 has exceeded one million, and the boutique dramas such as "One Servant and Two Lords", "Female Doctors" and "Big Cats" The price of a single episode has exceeded 2 million yuan, and the price of a single episode such as "Big Husband", "Hot Mom" and "Tiger Mom Cat Dad" has exceeded 4 million yuan.
The Board of Directors of the Reading Group believes that the acquisition is in line with the company's strategic objectives and unlocks the realisation potential of its intellectual property. According to the reading group, content adaptation companies (such as TV drama network drama production companies and film studios) are increasingly adding literary works as source materials, while the reading group's content library lays the foundation for adaptation to various media forms. At the same time, the reading group believes that the acquisition of Xinli Media will enhance the company's profit opportunities in the adaptation of literary content, from fixed licensing fees, passive revenue sharing and co-investment models to active role in internal production.