China's Huayi Brothers Looking to Expand Ties With STX Entertainment

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Huayi founder Wang Zhonglei

The Chinese studio's CEO says he has held "in-depth discussions" on deepening his collaboration with STX once the two companies' landmark slate financing deal expires in early 2018.

Chinese film studio Huayi Brothers Media is looking to expand its collaboration with Robert Simonds’ STX Entertainment, despite the recent clampdown by Beijing regulators on China-Hollywood dealmaking.

"We'd like to renew and deepen our cooperation with STX beyond slate financing," Huayi co-founder and CEO James Wang Zhonglei told Bloomberg in an interview published Monday. "STX has a lot of plans in television and multimedia. They also have a lot of new ideas for the Asian market. We have had a lot of contacts in this regard."

Huayi signed a landmark three-year deal with STX in 2015 to co-produce and co-finance most of STX Entertainment’s slate for three years. The Beijing-based studio also serves as STX's local distribution partner in China. But that agreement is set to expire in the first quarter of 2018.

Wang told Bloomberg that the two companies "have held in-depth discussions on further collaboration on investments and strategies." 

He also conceded that China's strict controls on capital outflows could affect those plans. Concerned by record amounts of overseas investment — and a raft of what it has described as "irrational deals" — Beijing regulators began instituting rigorous oversight of all major outbound transactions late last year. Media deals derailed, or perilously slowed, include the sale of The Hurt Locker producer Voltage Pictures to Chinese metals manufacturer Anhui Xinke New Materials for $350 million (the deal went bust shortly after it was announced in December), Dalian Wanda Group's $1 billion acquisition of Dick Clark Productions (aborted earlier this month), and Paramount Pictures' $1 billion financing deal with Shanghai Film Group and Huahua Media (understood to be in jeopardy of imminent dissolution).

"We have plans and wishes for more international cooperation, but we’re to some extent affected by capital control,” Wang told Bloomberg. "It’s fortunate that our overseas business plan is not acquisition-driven, nor are we financial investors, so our needs for foreign exchange are not vast," he added.

STX has made strategic investment from China a pillar of its business. Last summer, Chinese tech giant Tencent and Hong Kong telecom firm PCCW lead a fresh round of investment in the company. Simonds also recently told the South China Morning Post that he was setting up an STX office in Hong Kong and that the city was his first choice for an initial public offering.

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