Huayi Brothers pacts with Alibaba, Tencent

Chinese film studio Huayi Brothers is raising finance through Alibaba and Tencent, and also signing strategic partnerships with the rival internet giants.

The Beijing-based studio plans to issue 145 million shares and raise up to $588m through a private placement. Alibaba, through Alibaba Venture Capital (AVC), will buy 61.76 million shares and Tencent will take 51.55 million.

Under Huayi Brother’s strategic agreement with Alibaba, the two companies will co-distribute five films over the next three years. Alibaba will also provide around 5-10% of the total investment in Huayi’s films.

The two companies will also jointly promote ten films over Alibaba’s entertainment platforms and cooperate in online ticketing through Alibaba’s Taobao ecommerce platform.

The deal with Tencent gives the tech giant a first-look at cooperating with Huayi Brothers on derivative products such as books, games and comics, but excluding films. Huayi will also have first-look rights for Tencent’s TV series productions. Tencent will also invest around 5-10% in Huayi Brothers’ films.

Chinese investment group Ping An Capital Management is also buying 27.4 million Huayi Brothers shares, while CITIC Securities is taking 4.3 million shares. After the private placement, Alibaba and Tencent will each own just over 8% of Huayi Brothers.

The company’s founders will remain the largest shareholders with 27%, while Ping An will become the fourth largest shareholder with 2%.

Huayi Brothers was a major investor in Fury, starring Brad Pitt and Shia LaBeouf, which opens in China this weekend. The studio’s Pang Ho Cheung-directed romantic comedy, Women Who Flirt, opens next week.