Alibaba Group Holding and Tencent Holding push further into entertainment as their top executives increased their stakes in a Chinese television and film production company.
Huayi Brothers Media Corp introduced a plan to strengthen its relationship with Alibaba and Tencent by jointly producing movies in the future and said it will start distributing films through the two companies online platforms. Huayi is one of Chinas biggest film producers, one of its latest titles “Dragon Blade”, starring Jackie Chan, is expected to be released in 2015.
This is the latest effort from the internet giants to gain more ground in the entertainment business as they aim to get more users for their online platforms. Alibaba, the e-commerce behemoth and Tencent, dominant in the online games and social networks segments, have both created their own movie division aimed at the Chinese market, the second largest only behind the U.S.
Under the deal, Alibabas CEO Jack Ma and another executive at the company will purchase, through their investment firm, an additional 4% of Huayis shares, bringing the total of their stake to 8.1%
The investment firm, owned by Tencents CEO Pony Ma and other executives, will add 4.9% of Huayi shares, to raise its full stake at Alibabas level, at 8.1%.
The two companies will become Huayis second largest shareholders, after the companys two founders, who hold a combined 27% stake.
Huayi said it will also sell shares to two other investment firms. The value of all transactions is estimated to reach ¥3.6 billion.
The Chinese movie maker said it will co-produce five movies with Alibaba and Tencent in the next three year. Huayi added that the companies could invests in its other films by providing 5% to 10% of the total movie budget.
Alibaba said that its latest investment is a part of strategic plan focused on digital entertainment. The move comes after the company acquired a 60% stake in ChinaVision Media Group, which it renamed to Alibaba Pictures Group. Earlier this year the e-commerce giant also obtained a 16.5% stake in Youku Tudou Inc, an online video company.
“You can’t create every single piece of content that’s good. There has got to be other people that can create better content, so we want to partner with them” Executive Vice Chairman Joseph Tsai said.
Alibaba Group Holding Ltd lost 3.01% on Tuesday and closed at $110.81 in New York. On Wednesday the stock dropped 2.23% to trade at $108.34. The company is valued at $275.44 billion. According to the Financial Times, the 34 analysts offering 12-month price targets for Alibaba Group Holding Ltd have a median target of $120.45, with a high estimate of $148.00 and a low estimate of $75.00. The median estimate represents a 8.70% increase from the last close price of $110.81.
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