IMAX Sells 20% Stake In China Unit With Eventual IPO Plan

(RTTNews) - Canadian entertainment technology company IMAX Corp. (IMAX, IMX.TO) announced Tuesday the sale of 20 percent stake in its Chinese unit to private investors, aiming to further strengthen its competitive position in China. IMAX expects the transaction to lead to an eventual initial public offering of IMAX China (Holding), Inc.

In a statement, IMAX announced that CMC Capital Partners, a China-based investment fund that is run by Ruigang Li and focused on media and entertainment, and FountainVest Partners, a China-focused private equity firm, agreed to invest in its China business.

The deal price for the 20 percent investment is $80 million, which will be paid by the investors in two equal installments. The first installment would close today and the second installment will close in early 2015. IMAX China will continue to be a consolidated subsidiary of IMAX.

IMAX expects that the introduction of Chinese ownership into its China subsidiary would lead to an eventual initial public offering of IMAX China.

The company noted that some of the key goals of the sale include the continued expansion of its theatre network in China, the sustained performance in the marketplace of IMAX's Hollywood and Chinese titles, and the further strengthening of government and industry relationships within China. All these are believed to benefit from the strong presence of the investors, including Ruigang Li's knowledge of the Chinese media and entertainment industry.

IMAX CEO Richard Gelfond said, "We expect this strategic alliance, along with the strength of our existing relationships with Chinese partners like Wanda and TCL, will help us usher in the next phase of growth for IMAX in China."

According to the firm, the China market presents opportunities for additional growth with favorable market trends, including government initiatives to foster cinema screen growth, to support the film industry and to increase the number of Hollywood films distributed in China.

Greater China continues to be the company's second-largest and fastest-growing market, accounting for around 20 percent of revenue. IMAX's screen count in China has doubled since 2011 to 173 screens open with an additional 237 in backlog as of December 31, 2013.

IMAX said its Chinese unit will continue to have the right to conduct the IMAX business in Greater China. The company will establish a nine-member Board of Directors for IMAX China comprising six IMAX executives, one representative each from CMC and FountainVest and an independent member to be nominated by the newly formed board.

In the transaction, the Raine Group LLC acted as exclusive financial adviser to IMAX.

IMAX shares closed Monday's trading at $27.67, down $0.45 or 1.60 percent.