China Literature splurges on confusing plot twist

China Literature

14/08/2018 06:35

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Pete Sweeney
    HONG KONG, Aug 14 (Reuters Breakingviews) - Shares in the
$7 bln online publisher sank on lacklustre earnings and a big
cash and stock acquisition. Diversifying to buy a video producer
one third its size is bad enough. That Tencent, which already
owns a movie-studio, is on both sides of the deal makes it more
muddled. 
    
    Full view will be published shortly.
    On Twitter https://twitter.com/petesweeneypro 
    
    CONTEXT NEWS
   - China Literature agreed on Aug. 13 to buy New Classics
Media in a deal valuing the video content company at 15.5
billion yuan ($2.3 billion). NCM is 80 percent owned by its
managers and 20 percent owned by Tencent. 
    -Tencent also controls China Literature, which will fund the
transaction with 5.1 billion yuan in cash and 10.4 billion yuan
in stock, issued at HK$80 per share. That compares to an
undisturbed share price of HK$67 before the deal was
announced. The new shares will account for 14.5 percent of the
issued share capital after the deal. 
    - NCM has produced popular television shows and movies for
the mainland China market, including "Under the Hawthorne Tree"
by award winning director Zhang Yimou.
    -At the same time as announcing the deal, China Literature
reported that its revenue for the first half of 2018 increased
18.6 percent to 2.3 million yuan, compared to the same period
the previous year. 
    - Shares of China Literature were down almost 15 percent at
HK$57 at 1 p.m. (0500 GMT) on Aug. 14. 
    -  For previous columns by the author, Reuters customers can
click on  SWEENEY/ 
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    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Company announcement    http://hkexnews.hk/listedco/listconews/SEHK/2018/0813/LTN20180813756.pdf
BREAKINGVIEWS-China Literature results could use more drama    
 urn:newsml:reuters.com:*:nL3N1R11QX
BREAKINGVIEWS-China Literature must summon army of Harry Potters
     urn:newsml:reuters.com:*:nL3N1NG1CT
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Una Galani and Sharon Lam)
 ((pete.sweeney@thomsonreuters.com; Reuters Messaging:
pete.sweeney.thomsonreuters.com@reuters.net))