Chinese Film Studio DMG Planning IPO, With Valuation of Nearly $1 Billion

Jasper James
DMG Ceo Dan Mintz

The Beijing and L.A.-based company, which co-produced "Transcendence" and "Iron Man 3," is employing a "back door" listing strategy to jump to ahead of other companies waiting for an IPO in China.

Beijing and L.A.-based film studio and marketing company DMG, which co-produced Iron Man 3, Looper and Transcendence, is planning a “back door” initial public offering using a pork company listed in Shenzhen as a vehicle.

The deal will involve the meat processor Sichuan Gaojin Foods, which is listed on the stock exchange in Shenzhen, issuing shares in DMG to buy the larger company.

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Sources close to the deal said that the back-door listing mechanism was simply a way of jumping to the front of the line, as the Chinese government only recently started allowing IPOs again after 14 months in which the market went dark, and there is a queue of some 600 companies seeking a listing, including several other entertainment industry outfits, such as Shanghai Film Corporation and Wanda Cinema Line.

The deal still needs regulatory approval and is unlikely to happen until October or even the end of the year.

The move values DMG at $970 million (6.01 billion yuan). After the deal, DMG’s chairman and biggest shareholder, Xiao Wenge (who also goes by the name Peter Xiao) will become the largest individual shareholder of the listed company with 65.17 percent of the stock.

“We won’t make any official announcement until the process is complete,” a DMG spokesman said.

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In the past few weeks, China's regulator has posted a series of draft initial public offering (IPO) prospectuses, and there are now 46 potential issuers ready to go to market, and the local financial press has estimated they could raise as much as $3.62 billion (22.6 billion yuan) from investors.

The draft prospectuses were published on the website of the China Securities Regulatory Commission (CSRC), a sign that the government is seeking to revive the slumbering market for Initial Public Offerings.

DMG began as an advertising and television commercial production company, but has also invested in domestic film production and imported film distribution.

DMG has co-produced a number of domestic and international films, including the world's highest-grossing film of 2013, Iron Man 3, and Looper, as well as domestic movies including No Man's Land, Founding of a Republic and Go Lala Go!.