Golden Harvest, a HongKong-based regional exhibitor with more than 300 screens across Asia, is set to sell its 40.2% stake in Malaysia's Golden Screen Cinemas (GSC) for $25m (RM91m) tofund expansion in China.
The Golden Harvest stakewill be acquired by its partner PPB Group, a listed company on Malaysia's stock exchange and a unit of Kuok Brothers whichhas diversified businesses in food industries, rubber plantations and property,among others. The acquisition will raise PPB's stake to 94.4%, enabling it totake almost full control of GSC.
As Malaysia's largest cinema chain with 108 screens in 18locations, GSC enjoys a near 50% market share in terms of box office. Thecompany will continue to open five multiplexes with 43 screens in the next twoyears.
"We have a good relationshipwith PPB, our partner for 17 years. Even after the sell-off, we will continueto work closely together with GSC on distribution," says Golden Harvestmanaging director CK Phoon.
In Malaysia, the companyalso owns TGV Cinemas, a 50:50 joint venture with the Tanjong Group whoseprincipal activities are power generation and gaming. Phoon says Golden Harvesthas no immediate plans to sell the TGV stakes.
The company will use theproceeds mainly for further expansion in China. In 2007, it will open two new cinemas in Shenzhen andadd five screens to its existing seven-screen Shenzhen multiplex which is oneof the mainland's highest-grossing sites. It is also looking at other citieswith a strong cinema-going culture such as Shanghai, Guangzhou,Beijing, Hangzhouand Chengdu.
"Last year's returns oninvestments in both Shenzhen and Taiwan were better than originally expected, but we don'tneed to invest further by ourselves in Taiwan because the joint venture has enough capital to fundexpansion," says Phoon.
After acquiring nine cinemaswith 93 screens from Time Warner in Taiwan, Golden Harvest will open a nine-screen multiplex inTaipei next year.
Golden Harvest has filed acourt petition to wind up its partnership with Australia's Village Roadshow for Golden Village in Singapore. A trial is expected in 2007.