China's Bona Film Group Files IPO
BEIJING – The Bona Film Group, China's biggest private movie distributor-turned-movie studio, has filed for a Nasdaq initial public offering seeking to raise $80 million through the sale of its shares to U.S. investors, papers filed on Tuesday in New York show.
Founded in 1999, Beijing-based Bona, run by CEO Yu Dong, has, after the state-run China Film Group, dominated the recent boom in China's box office through the co-production and distribution of films from China and Hong Kong, including such hit 2009 titles as director Teddy Chan's Bodyguards and Assassins.
The planned U.S. IPO, the first in a foreign market for a major Chinese film studio, is expected early next year. B of A Merrill Lynch and J.P. Morgan in New York, the China Investment Capital Corp. in Beijing, and U.S. backers Piper Jaffray and Cowen and Co. will underwrite Bona's listing.
Though Bona, which was capitalized at $92.3 million as of Sept. 30, only got into film production two years ago helped by the efforts of Jeffrey Chan, a Hong Kong film industry veteran, the company's 12 films in 2009 racked up more than a 14% share of China's ticket sales for a total of nearly 450 million yuan ($68 million), industry estimates show.
This year, China's overall ticket sales soared 86% to $714 million from January through June and are sure to shatter 2009's record box office take of $909 million. In 2009, Bona's net revenues were $32.4 million, up 38% from $23.4 million in 2008. For the first three quarters of this year, Bona reported a loss of $7.5 million, compared with a year-earlier profit of $1.2 million. Revenue more than doubled to $35 million.
Bona currently is producing Hong Kong director Tsui Hark's 3D martial arts remake The Flying Swords of Dragon Gate, starring Hollywood crossover star Jet Li. The two have not worked together since the early 1990s when their Once Upon a Time in China films broke box office records. The company also manages cineplexes and a talent agency.
"Yu and Chan are first class guys who are really trying to get the program running again in China. They're hard wired for business and poised to take advantage of what's sure to be strong growth to come," L.A. entertainment lawyer Tom Garvin, who's been doing business in China since the 1980s, said upon hearing the news of the IPO filing. "From a Chinese company's perspective, it makes sense to list in the U.S. because it's generally perceived that American markets are the gold standard, despite the difficulties of recent months."
Yu led Bona to become the first private Chinese firm to receive a film distribution license from the State Administration of Radio Film and Television, signaling the beginning of the privatization of a segment of the film industry long controlled by a one-party state.
Bona, in fact, has government ties of its own, having merged in November 2003 with the China Poly Group, a business wing of the People's Liberation Army, to form PolyBona Film Distribution, the company's former English name. That month, the company distributed Walt Disney's Pirates of the Caribbean: Curse of the Black Pearl and grossed 28 million yuan ($3.4 million at 2003 exchange rates) four months after its U.S. summer release back when there were far fewer than the roughly 5,000 modern movie screens that exist now in China and are expanding every month.
Distribution of imports is a privilege normally reserved for the China Film Group and its state-run cousin, Huaxia Film Distribution, which together form a virtual duopoly for the distribution of imported movies, whose number China limits to 50 a year -- only 20 of which pay foreign copyright holders back about 13% of their films' gross.
Bona, which no longer is connected to China's military, counts among its private competitors Huayi Brothers Media, which raised $176 million on the Shenzhen Stock Exchange in October 2009 and Enlight Media, a Beijing based TV company turned movie studio.
In Nov. 2006, The Hollywood Reporter named Yu one of "the future's most influential filmmakers." In keeping with Bona's twin corporate mottos -- "Work sincerely with the firm's trademark in mind" and "Learn the strong points of others, and listen to all voices" -- Yu has traveled the world in recent months to sell his vision for China's filmed entertainment and strike deals with significant partners.
In June this year, during the Shanghai International Film Festival, Yu and Katherine Kim, CEO of South Korean media giant CJ Entertainment, announced that after their successful collaboration on the 2009 hit Sophie's Revenge, starring Chinese actress Zhang Ziyi and Korean actor So Ji-sub, their companies would work on at least two co-productions a year targeting pan-Asian audiences. CJ followed up soon after by investing in Bona's Chinese remake of Paramount's What Women Want, starring Andy Lau and Gong Li.
According to its website, Bona has distributed more than 120 domestic and foreign films, including Confession of Pain, Protege, The Myth, Initial D, and Dragon Tiger Gate, generating more than 1 billion yuan ($150 million) in box office grosses. The company's co-productions include The Warlords, by Peter Chan, Red Cliff, by John Woo, Flash Point, by Wilson Yip, and After This Our Exile, by Patrick Tam, some of the best critically and commercially received Chinese-language films of recent years.
Bona's U.S. IPO filing follows close on the heels of the filings for U.S. public listings by China's two largest online video sharing web sites, Youku with the New York Stock Exchange and Tudou on the Nasdaq.