By buying into film giant Huayi Brothers Media Corp., China's Internet behemoth Tencent Holdings Ltd. takes a solid step to expand beyond its traditional Internet businesses.
Tencent is set to pay 450 million yuan ($69 million) for a 4.6-percent stake to become the largest institutional shareholder in Huayi.
Huayi is dubbed "China's Warner Brothers of tomorrow" for the leading role it plays in the domestic movie industry. It now accounts for around 30 percent of movie production and distribution in the country.
"The investment is a strategic partnership that will allow new attempts from both sides to combine the film industry with the new media sector," said Liu Chiping, President of Tencent.
"Huayi Brothers is shifting from film and TV drama production to new media sectors," said Wang Zhongjun, Chairman of Huayi. "Tencent's rich experience in customer service and product innovation will provide synergies for both companies in our future development."
Dick Wei, an analyst at JPMorgan Securities (Asia Pacific) Ltd., said the deal would give Tencent "more media influence" as the company widened and diversified its business.
Zhao Yujie, an analyst at the China Merchants Co. Ltd., said the tie-up could help Tencent carve out a niche in the fast-growing and increasingly competitive online video market.
Huayi could also benefit from solid customer base of Tencent, he said. Active user accounts of the QQ instant messaging service totaled 647.6 million at the end of December 2010. |