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Editors of Every Economic Report: Duan Lian, Zhang Jinhe

On the evening of July 23, the once-glorious film and television giantHuayi Brothers(300027) announced that the company intends to transfer 70% of the equity of its holding subsidiary Zhejiang Dongyang Mira Media Co., Ltd. (hereinafter referred to as "Dongyang Mira") to Beijing Alibaba Film Culture Co., Ltd. (formerly known as Beijing Zhonglian Huameng Culture Media Investment Co., Ltd.) (hereinafter referred to as "Alibaba Pictures”), the equity transfer price is 350 million yuan.

After the completion of this transaction,The company no longer holds shares in Dongyang Meila。The second largest shareholder of the target company is Feng Xiaogang, holding 30% of the shares。

Huayi Brothers: Plans to acquire 70% equity of Dongyang Mira

Transferred to Alibaba Pictures to pay off debts

The announcement stated that since Hangzhou Alibaba Venture Capital Co., Ltd. (hereinafter referred to as "Ali Venture Capital") and Mr. Jack Ma are joint actors and together hold more than 5% of the company's shares, Alibaba Pictures is an affiliate of Ali Venture Capital. According to the relevant provisions of the "Shenzhen Stock Exchange ChiNext Stock Listing Rules", this transaction constitutes a related transaction.

Public information shows that Alibaba Capital and Jack Ma are the second and third largest shareholders of Huayi Brothers, with shareholding ratios of 3.47% and 2.60% respectively.

The announcement stated that Alibaba Pictures previously provided the company with a loan of RMB 700 million for a period of 5 years. The company's 70% equity in Dongyang Mira and the self-owned real estate and state-owned land use rights held by the company's wholly-owned subsidiary Beijing Huayi Brothers Jiali Culture Development Co., Ltd. (hereinafter referred to as "Jiali Culture") provide mortgage guarantees. The company provides mortgage guarantees for the above loans with three self-owned real estates and one self-owned real estate held by the company's wholly-owned subsidiary Huayi Brothers Interactive Entertainment (Tianjin) Investment Co., Ltd. (hereinafter referred to as "Huayi Interactive Entertainment"). The company's wholly-owned subsidiary Huayi Brothers Film Co., Ltd. provides joint and several liability guarantees for the above loans. Wang Zhongjun, Liu Xiaomei, Wang Zhonglei and Wang Xiaorong provide personal joint and several liability guarantees for the above loans. The guarantee period is five years and the guarantee amount is RMB 700 million.

On November 13, 2023 and November 29, 2023, the company held the 3rd meeting of the 6th Board of Directors and the 5th Extraordinary General Meeting of Shareholders in 2023, and reviewed and approved the "Proposal on Transfer of Equity of Wholly-Owned Subsidiaries and Related Transactions". After friendly negotiations between the two parties, the "Equity and Credit Transfer Agreement" and the "Credit Transfer, Debt Transfer and Offset Agreement" were signed to transfer the 100% equity of Jiali Culture held by the company's wholly-owned subsidiary Beijing Huayi Brothers Entertainment Investment Co., Ltd. (hereinafter referred to as "Huayi Entertainment Investment") and all the creditor's rights of Huayi Entertainment Investment to Jiali Culture (130,018,605.51 yuan) to Zhonglian Shengshi Culture (Beijing) Co., Ltd. to offset 350 million yuan of the above-mentioned total loan amount of 700 million yuan.

On July 8, 2024, the company held the 13th meeting of the 6th Board of Directors and reviewed and approved the "Proposal on the Company's Extension of Loans to Related Parties and Related Transactions". After friendly negotiations between the two parties, it is planned to sign the "Supplementary Agreement to the Loan Agreement" to extend the remaining 350 million yuan of loans for 3 months, that is, until October 24, 2024. This proposal still needs to be submitted to the company's shareholders' meeting for review.

After friendly negotiation between the two parties, it is planned to sign the "Equity Transfer Agreement" and "Debt and Credit Offset Agreement", and it is expected that the company will transfer 70% of the equity of Dongyang Meila held by the company to Alibaba Pictures, and the equity transfer amount is 350 million yuan. At the same time, the company should offset its payment obligation to Alibaba Pictures for the remaining principal payable to Alibaba Pictures after deducting the valuation impairment amount (if any) with Alibaba Pictures' payment obligation to the company for the balance of the equity transfer payment payable to the company after deducting the valuation impairment amount (if any).After offsetting, the balance of both is zero.。

At that time, I spent more than 1 billion yuan to buy it from Feng Xiaogang

Feng Xiaogang paid 235 million RMB for unfinished gambling

The announcement shows that Dongyang Mira was established in September 2015. Its legal representative is Wang Zhonglei, its actual controller is Wang Zhongjun, its registered capital is RMB 5 million, and its major shareholders are Huayi Brothers Media Co., Ltd. (holding ratio: 70%) and Feng Xiaogang (holding ratio: 30%).

The company's main business includes production, reproduction and distribution: special topics, columns, variety shows, cartoons, radio dramas, TV series; production and distribution of online dramas; distribution of domestic films; filming of movies (single films); film and television cultural information consultation; film and television script creation, etc. According to the Lighthouse Professional Edition, Zhejiang Dongyang Mela Media Co., Ltd. has produced movies such as "Youth" and "If You Are the One 3".

China Business News previously reported that around 2015, Huayi BrothersAcquired 70% of the equity of Feng Xiaogang's company Dongyang Mela for 1.05 billion yuanThe company had just been established at that time and was valued at 1.5 billion yuan by Huayi Brothers.

Huayi Brothers acquired Dongyang Mira at such a high premium because it signed a five-year bet agreement with Feng Xiaogang: from 2016 to 2020, Dongyang Mira promised that its annual after-tax net profit would not be less than 100 million yuan, and would increase by 15% each year. If the target could not be achieved, Feng Xiaogang would make up the difference in cash.

This investment made the cooperation between Feng Xiaogang and Huayi Brothers closer. However, in the next five years, the only films directed and released by Feng Xiaogang were "I Am Not Madame Bovary", "Youth" and "Only Yun Knows", which earned 482 million yuan, 1.422 billion yuan and 159 million yuan respectively.Feng Xiaogang's Dongyang Meila also failed to meet the agreed figures in the gambling agreement twice, and had to pay Huayi Brothers 235 million yuan in total.。

According to Metropolis Express, in 2018, with the release of such masterpieces as "Wolf Warrior 2", "Dying to Survive", "The Wandering Earth", "Nezha: The Devil Child Comes into the World" and "Operation Red Sea",Beijing Culture、Enlight Media、Bona Film GroupAs the company rose to prominence, a group of new directors also emerged.Chinese filmThe situation has undergone a major reshuffle. On the other hand, Huayi Brothers can only boast the "Ex-Files" series.

It was also from this year that Huayi Brothers began to suffer consecutive losses, with cumulative losses exceeding 7.4 billion yuan in five years.

In 2023, Huayi Brothers achieved a total operating income of 666 million yuan, a year-on-year increase of 65.59%; the net profit attributable to the parent company was a loss of 539 million yuan, compared with a loss of 981 million yuan in the same period last year. In the first quarter of this year, the company achieved operating income of 95.215 million yuan, a year-on-year decrease of 59.20%, and a net profit attributable to the parent company of -19 million yuan, with a year-on-year increase of 76.76%.

As of the close of July 23, Huayi Brothers' share price closed at 1.61 yuan, with a total market value of only 4.467 billion yuan, which has evaporated by more than 90% from its peak market value of more than 70 billion yuan.

Editor|Duan Lian Zhang Jinhe Du Bo

Proofreading|Liu Siqi

Daily Economic News is compiled from Huayi Brothers' announcement, China Business News, Metro Express, Meijing.com, public information, etc.

Daily Economic News