Australias Village Roadshow Ltd announced on Monday it had reached a deal with Chinese investment company Citic Group to start the construction of theme parks on the mainland.
The company said that after more than two years of negotiations it has inked a deal with a subsidiary of state-owned Citic to form a $500-million joint venture that will help the Australian theme park operator expand in China.
Village Roadshow, which also operate Australias largest cinema chain, said the companies would each invest $25 million in theme parks, entertainment facilities and related real estate developments over the next two to three years throughout Asia with a particular focus on China.
The Australian company said it will have a 49% stake in the newly formed fund management company, while Citic will have the rest. However, Village Roadshow will control a minimum of 60% of the management firm in charge of designing, building and operating the planned theme parks.
The move is also in line with the governments desire to boost domestic consumption, while slowly shifting away from industrial manufacturing. However, the market already has enough players and it may prove difficult for the joint venture to succeed.
Additionally, more companies have announced that they will join the race for Chinas dynamic middle class, including Walt Disney, Comcast and Six Flags, who have all said they will open theme parks in China in the near future.
The agreement follows increased spending on theme and amusement parks located on the mainland, answering greater consumer demand for entertainment activities. According to researcher IbisWorld, revenue from amusement Parks will edged up 9.3% to $3.3 billion.
“We look forward to working closely with CITIC and are extremely excited about bringing our China and Asia Master Plan to reality”, said Village Roadshow Co-CEO Robert Kirby.
The join venture also outlines that Citic is ready to continue working with Australia, despite its legal dispute with mining company Mineralogy, which tried to terminate Citics involvement in in the $10 billion Sino Iron Project.
Village Roadshow gained as much as 5% after the announcement, but closed in Sydney with only a 0.37% gain to A$5.48, marking a one-year decrease of 19.70%. The company is valued at A$870.99 million.
According to the Financial Times, the 6 analysts offering 12-month price targets for Village Roadshow have a median target of A$6.97, with a high estimate of A$7.45 and a low estimate of A$6.00. The median estimate represents a 27.66% increase from the last closing price.
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