Imax Sells 20 Percent Stake in Its China Business

Rich Gelfond, CEO of Imax

The deal aims to strengthen the giant-screen exhibitor's position in the booming Chinese movie market.

TORONTO – Imax has sold a 20 percent stake in its expanding China business for $80 million to CMC Capital Partners and FountainVest Partners, a China-focused private equity firm.

The investment, to be paid in two tranches, is in Imax China Holding Inc., the giant-screen exhibitor said Tuesday.

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"We believe Ruigang Li and CMC, as well as FountainVest, are ideal partners whose status, leadership and expertise will be invaluable in helping us accomplish these goals," Imax CEO Richard Gelfond said in a statement.

Imax in a SEC 8K filing on Tuesday indicated it will issue 337,500 common C shares in Imax China with a value of $0.01 each for a combined value of $40 million on April 8, 2014 to its new strategic investors, and then do a second $40 million share issue a year later on April 8, 2015.

Imax China will remain a subsidiary of Toronto-based Imax Corp., and will have a nine-member board of directors comprising six Imax Corp. executives, one representative each from CMC Capital Partners and FountainVest Partners, and one independent member to be nominated by the entire board.

Ushering in Chinese ownership of its Chinese business could see Imax complete an eventual IPO of Imax China.

"We are strategically aligned with these Chinese investors to grow the business with the goal of taking Imax China public in China within five years," Gelfond told analysts during a morning call.

The eventual IPO would look to raise between $900 million and $1 billion in China for Imax's local business.

To get there, Imax will need to continue expanding its screen count in China, and screening tentpole Hollywood movies and Chinese titles.

Gelfond told the analysts that introducing local Chinese ownership would better allow Imax to navigate local regulatory and market waters to achieve an IPO and get into subsidiary businesses in China.

CMC Capital Partners is a media and entertainment focused fund, with Li as chairman.

The fund earlier acquired a controlling stake in Star China, the onetime China assets of News Corp., and has a joint venture with DreamWorks Animation.

Imax's screen count in China has doubled since 2011 to 173 screens, and there are an additional 237 screens in backlog as of December 31, 2013. The screen expansion has been underpinned with multi-theater deals with local players including Wanda and TCL.

Imax's Gelfond said his company would retain a majority stake in Imax China after an IPO is completed.