Bona fide business

Taiwanese actress Hsu Wei-ning stars in Battle of Memories

During last year’s Shanghai International Film Festival, Bona Film Group’s founder Yu Dong told reporters that if the studio didn’t complete an A-share listing soon it might become a takeover target for Wang Jianlin’s property conglomerate Wanda Group, which operates a rival studio, as well as the biggest cinema chain in China.

Bona was the first Chinese studio to go public in the United States in 2010 but it was taken private by Yu and other investors last year in a Rmb5.5 billion ($798 million) buyout. Similar to many returnees from the US, Yu believed his company’s true value was not being appreciated. “I decided that we had to return to the A-share market after The Taking of Tiger Mountain [a box office hit in 2015]. Even though it was a huge success at the box office and critics really embraced it our share price on NASDAQ continued to drop. It made me very depressed,” he claimed.

Yu’s speculation about Wanda were not unfounded. While Bona is still laying the groundwork for a relisting, Wanda Cinema, Wanda’s Shenzhen-listed unit, announced last week it will buy a stake in the film studio.

Wanda Cinema said it will pay Rmb300 million ($43.4 million) for 1.9% of Bona. The deal that has been brokered with Yu, however, will also see Bona’s cinemas become a part of Wanda Cinema. At the moment, Bona owns 41 cinemas while Wanda has 416.

Critics say the deal makes sense for Wanda. Bona’s strong track record could give the cinema operator a boost in its effort in moving upstream. In addition to The Taking of Tiger Mountain, Bona’s other features have included writer-director Han Han’s Duckweed, as well as Operation Mekong. They were not only big box office hits but also received favourable reviews from critics, says CBN.

Meanwhile, Wanda remains relatively new to local filmmaking. Recently, The Missing, which was released by Wanda in late March, received a flood of criticism. And then Battle of Memories, a crime thriller that starred Taiwanese starlet Hsu Wei-ning, also flopped, grossing only Rmb300 million.

“Everything about Battle of Memories feels forced. It pretends to be sci-fi; it intentionally misleads; and in the end, it forces a twist that makes no sense. Instead of making us unravel the puzzle, we feel like setting ourselves on fire,” one critic wrote dismissively.

Wanda acquired Hollywood studio Legendary in 2016 for $3.5 billion. A stake in Bona could further strengthen Wanda’s experience in producing content.

“Legendary combined with Bona could really bolster Wanda’s development in film production. And besides, if Bona relists on the A-share market, the two can divide and conquer in content production and distribution. That is a formidable combination,” says Sohu Entertainment, a news portal.

National Business Daily also reckons that a tie-up with Wanda is not a bad move for Bona. Backed by a big cinema chain, Bona will have no trouble securing the best screening slots for its movies, a strategy critical to a film’s success in China.

Huayi Brothers, a rival film studio, has learned that the hard way. Its feud with Wanda (see WiC348) means that a lot of the movies it backs don’t get the best scheduling at Wanda cinemas. The Indian film Dangal, which Huayi distributed in China, was no different. It received a 9.2 rating out of 10 on Douban, a movie and TV review site, but Wanda allocated less than 1% of its total screens to the film (see WiC366). Critics say that explained the weak opening of Dangal – normally fatal for commercial prospects – but thanks to unusually good word of mouth its box office haul has now surpassed $100 million, a record for an Indian film in China.

“Perhaps Bona sold a stake to Wanda because it doesn’t want to end up like Huayi Brothers,” Huxiu, a portal, grimly concludes.

Industry experts say the alliance has made rival studios nervous. “Clearly, the tie-up between Wanda and Bona is bad news for Enlight Media and Huayi Brothers [Bona’s two biggest rivals],” one private equity manager told National Business Daily. “Wanda and Bona’s cooperation will squeeze out the screens given to Huayi and Enlight. So if they want the support of Wanda, they will likely have to make greater concessions, further eroding their bargaining power.”

Meanwhile, Bona has been working hard to rapidly relist on the A-share market. Already, the studio has moved the company’s headquarters from Beijing to Xinjiang, where local firms often receive preferential IPO treatment from the central government to lift incomes in one of the poorest regions in the country. China Enterprise News also reported that Bona has submitted paperwork to Xinjiang’s securities regulators about an impending initial public offering. If it is any comfort for Yu, the Wanda Cinema deal values Bona at Rmb16 billion. That is more than double the $1 billion the company was worth when it was taken private.

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