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Legendary East, valued at $441 million, plans to go public

August 22, 2011|By Ben Fritz, Los Angeles Times

Legendary Pictures' new Chinese film venture will trade publicly on the Hong Kong stock market in an agreement that initially values the company at $441 million and provides it with a $220.5-million cash infusion.

Legendary East, which intends to produce one or two English language movies based on Chinese history and culture per year to be distributed globally, is raising the money through Paul Y. Engineering Group, a shell company that already trades on the Hong Kong Stock Exchange. The shell will own 50% of Legendary East.

The agreement, announced in Hong Kong on Sunday, details for the first time the financing and ownership structure of Legendary East. The joint venture was first publicly revealed in China in early June.

Legendary Pictures, a Burbank-based film finance and production firm known for such hits as "The Dark Knight" and "The Hangover," will get a 40% stake in the China venture, though up to 11% of that may be given to management of Legendary East.

The other 10% of the company will be owned by Huayi Brothers International, a partner in Legendary East that will distribute its movies in China.

A private equity firm controlled by Kelvin Wu, who will be Legendary East's chief executive, is investing $35 million in the shell company as part of the new arrangement.

Thomas Tull, Legendary Pictures' chairman, will have the same title at Legendary East.

In addition to the money raised on the Hong Kong Stock Exchange, Legendary East intends to obtain a credit facility of up to $225 million, according to public documents filed by Paul Y. Engineering Group's parent company.

The movies Legendary East produces will not be subject to China's government-imposed limit of approximately 20 imported pictures per year that can receive a share of box-office revenue. And because they are local co-productions, they will receive a higher percentage of box-office revenue than foreign movies.

Along with the one or two English language movies it will make annually beginning in 2013, Legendary East can also finance up to 25% of the budgets of two other movies per year, according to the public documents.

The announcement of the venture's financial details comes just a week after Relativity Media, another independent Hollywood studio, unveiled its own joint venture to try to take advantage of China's booming movie market.

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