As per varied sources, Chinese conglomerate Dalian Wanda Group Co., is eyeing a stake in Lions Gate Entertainment Corp. (LGF). Earlier, in November, market was abuzz with rumors of Alibaba Group Holding Ltd. (BABA) being in talks with Lions Gate for buying stake in the latter.
Though Dalian Wanda is looking to have a controlling stake in the Lions Gate, the latter does not seem to be comfortable with the approach. Shares of this film studio were up 3% yesterday.
Chinese companies are taking a major interest in Hollywood studios. As the Chinese film industry has witnessed extraordinary success of late, acquisition of a Hollywood studio will make distribution of movies to the large overseas audience much easier.
Notable Chinese-Hollywood collaborations in recent times include Dalian Wanda Group’s acquisition of AMC Entertainment in 2012 and Lions Gate‘s collaboration with Alibaba to offer streaming services in July this year. Moreover, Shanghai-based Fosun invested $200 million in Studio 8 in June this year.
Lions Gate has been on a roll in the past two years given the huge success of The Hunger Games franchise. The Hunger Games: Mockingjay Part 1, which released on Nov 21, has amassed the highest opening for 2014, raking in $123 million over its debut weekend. The previous installments, namely The Hunger Games (2012) and The Hunger Games: Catching Fires (2013), also opened at no.1 slots and registered $150 million plus openings.
The Hunger Games, for its parent Lions Gate, has been a shot in the arm, making it a force to reckon with in the media circle. The movies have till date raked in over $1.8 billion and Lions Gate’s share price has risen considerably in the past two years. The studio also has rights to the hugely popular Twilight series.
Moreover, the company has a strong movie distribution platform. It has the distribution rights for several movie studios including CBS Corporation (CBS) and Miramax Studios. The company’s library boasts of 16,000 titles.
All these factors make Lions Gate an attractive pick for investment. As per Wang Jianlin, chairman of Dalian Wanda Group, the company is looking for major players that will help in distribution.
However, the Chinese want control and that will emerge as a bone of contention between the two parties. Moreover, the talks are in the preliminary stage and have chances of falling apart.
Currently, Lions Gate is a Zacks Rank #3 (Hold) stock. A media stock worth consideration is Time Warner Inc. (TWX), which sports a Zacks Rank #2 (Buy).
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