* Plans to acquire 120-150 China cinemas over next 3 years
* In talks with domestic institutions; may pitch in up to 30 pct
* China expected to overtake U.S. by box-office revenue in few yrs
By Julie Zhu
HONG KONG, Jan 18 (Reuters) - Chinese conglomerate Sanpower Group is launching a fund with a 3 billion yuan ($435 million) target that will be used to acquire up to 150 domestic cinemas in a bet on rapid growth in the country’s movie market, two sources with direct knowledge of the matter said.
Sanpower is in talks with several domestic institutional investors, including banks and investment funds, for contributions, the sources told Reuters. The privately-owned conglomerate itself will commit 20 percent to 30 percent of the fund’s capital, they said, adding it is expected to close in the second half of 2017.
The Nanjing-based group, founded by its billionaire chairman Yuan Yafei in 1993, shot into international prominence in 2014 after buying Britain’s high-street retailer House of Fraser. It has spent about $4.2 billion on domestic and outbound acquisitions over the past two years, data compiled by Thomson Reuters showed.
Sanpower’s maiden entertainment industry buyout fund will enable it to raise external private capital to support its acquisition spree without dipping into its own balance sheet or seeking debt-funding.
The fundraising comes as Sanpower is seeking to diversify from a focus on property, retail and healthcare and tap into cinema-crazy China, which is poised to become the world’s largest movie market by box-office revenue in the next few years, overtaking the United States.
But after a surge in recent years, the growth rate of China’s movie market is cooling, with total ticket sales rising just 3.7 percent in 2016 to 45.7 billion yuan amid a crackdown on box-office fraud, after a 49 percent jump in 2015.
Sanpower, which is already building about 10 cinemas that will open in 2017 and 2018 in a few tier-two cities like Nanjing, aims to buy between 120 to 150 cinemas across China over the next three years, the sources said.
The group, when contacted, confirmed the plan for the fund but declined to give details. The sources declined to be identified as the fundraising plans are confidential.
Sanpower has more than 100 subsidiaries, including Shanghai-listed retail arm Nanjing Xinjiekou, one of China’s oldest department stores. It employs over 100,000 people in industries ranging from retail to real estate with assets worth over 100 billion yuan, according to its website.
Last week, it agreed to buy the Dendreon cancer treatment business from Canada’s Valeant Pharmaceuticals International Inc for $820 million. ($1 = 6.8986 Chinese yuan renminbi) (Reporting by Julie Zhu; Editing by Denny Thomas and Muralikumar Anantharaman)