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Imagi in $130 million Toon Express buy

Imagi in $130 million Toon Express buy

By Patrick Frater

Mon, 21 February 2011, 14:00 PM (HKT)

Corporate News

Imagi International Holdings (意馬國際控股有限公司), the restructured Hong Kong-based animation group, is to use its stock-market listing to buy its way into China.

The company is to pay up to HK$1.05 billion ($130 million) to buy Toon Express Group (動漫火車集團), brand-manager of Pleasant Goat and Big Big Wolf (喜羊羊與灰太狼). Made with rudimentary animation techniques, the The Pleasant Goat concept has been a runaway hit as a TV series, a feature film franchise and even as a stage show.

Imagi will pay an initial HK$814 million ($105 million) for the company and a possible further HK$233 million ($30 million) of earn-out payments dependent on Toon Express' profits over the next two years.

In a statement to the stock market Imagi said that the purchase would broaden its revenue, provide complimentary skills, bring experienced management and allow it to sell its other properties through Toon Express's relationships.

These relationships include two deals with Disney. A deal signed in late 2010 will see the US media giant distribute the series in 52 countries on its Disney Channel and elsewhere. A separate ten-year master licence agreement with Disney, characterised as a prime example of Disney's process of localisation, sees Disney take over management of more than 200 consumer goods licensing arrangements previously signed by Toon Express.

Soh Szu Wei (蘇思偉), Toon Express' boss will be appointed executive director and CEO of the enlarged Imagi.

Toon Express has a ten-year contract with its production and content licence partner CPE. This includes the production of a 220 further TV episodes, at least half of which will be Pleasant Goat, each year. Toon Express and CPE are also committed to producing three more Pleasant Goat and Big Big Wolf movies over the next five years. Speaking at a press conference in Hong Kong, Soh said that the company needs to "upgrade" the Pleasant Goat movies and that it is now considering producing these in stereoscopic 3-D.

The first movie Pleasant Goat and Big Big Wolf — The Super Adventure achieved RMB80 million ($12.1 million) at the Chinese box office , which was the highest box office for a locally-produced animation in China at that time. The second, Pleasant Goat and Big Big Wolf — Desert Trek: The Adventure of the Lost Totem (喜羊羊與灰太狼之虎虎生威), scored RMB128 million ($19.4 million) last year, while the third Moon Castle: The Space Adventure (喜羊羊與灰太狼之兔年頂呱呱3) released last month has already grossed over RMB150 million ($22.7 million).

Other animation properties operated by Toon Express include Happy Family (寶貝女兒好媽媽), Cookie Masters (小宋當家), Planet of 7 Colors (七色戰記) and Legendary Soccer Kid (宋代足球小將).

Imagi's initial down-payment includes HK$330 million ($42.4 million) of cash, which will be funded through the issue of new shares worth HK$360 million ($46.3 million) to a select group of investors. These include Li Ka-shing (李嘉誠), Asia's richest businessman and head of Hutchison, through his Bofanti investment vehicle; IDG, a US-Chinese private equity fund with significant film industry investments; and Mousse Partners, a New York fund manager which has also previously invested in Asian film.

Imagi was set up as an animation studio that combined Hollywood talent and Hong Kong production facilities, but its first two in-house productions TMNT and Astro Boy underperformed. The company completed a major restructuring in May last year and announced a loss of over HK$521 million ($67 million) for the six months to September.

Imagi chairman Francis Leung (梁伯韜) told Film Business Asia that production of the company's two currently unfinished feature film projects Gatchaman and A Cat Tale had been slowed down ahead of the Toon Express deal. Soh said that the group will now assess its film production priorities and that its commitment to making the next three Pleasant Goat films already represents a tight schedule.

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