Jack Ma joins forces with Peter Lam

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Corporate News

Jack Ma (馬雲), the billionaire this month described on the cover of Forbes magazine as "The Face of China Inc", has allied himself with Peter Lam's (林建岳) Hong Kong entertainment empire eSun through a complicated US$90 million joint investment pact.

The deal, which also has the support of China's NASDAQ-listed internet portal Sina (新浪), has the potential to transform the fortunes in mainland China of eSun and its Media Asia (寰亞電影有限公司) film subsidiary. The deal also represents a significant change of entertainment industry bets by Ma.

Through different offshore investment companies, eSun and Ma's Yunfeng Fund (雲峰基金) are reversing themselves into Rojam Entertainment, a shell company listed on Hong Kong's second tier Growth Enterprise Market. Through share and convertible notes issues they will flood the company with injections totalling HK$693 million (US$89.4 million).

If all the deals are completed eSun will hold 58% of the expanded Rojam, Yunfeng, will hold 19.5%, Sina 3.5% and three other concert party investors will have stakes that add up to a further 10.2%.

Rojam, which has dwindling interests in "value added services" (ringtones, games and other media content) sold to mobile phone users in China, lost HK$16.9 million (US$2.17 million) in the year to March 2010 on revenues of HK$1.91 million (US$246,000).

Ma, founder of online trading platform Alibaba and online auctioneer Taobao (淘寶網), is expected to be able to help eSun and Media Asia expand in China. Media Asia has co-invested in mainland film productions, but has not built a significant production or distribution base.

Rojam describes the deal as allowing it to "build up its entertainment business in event management, music, film, artiste management, internet content licensing and TV drama, with primary focus in the PRC and Macau markets."

Ma, with a personal net worth of US$1.2 billion, has invested in the media and entertainment sector before. In December it was revealed that Yunfeng had sold some 90% of his holdings in Huayi Brothers Media (華誼兄弟傳媒股份有限公司), the leading private sector film group in China, for a gross return of some RMB76 million (US$11.5 million).

Ma, who was a board director of Huayi, issued a reassuring statement of confidence about Huayi and explained that the sale was simply a case of cashing in his profits. Shortly after, it was revealed that Yunfeng had recently invested RMB50 million (US$7.6 million) in Zhang Yimou's (張藝謀) Impression Series (印象系列), a company which puts on long-term stage shows at major regional cities, including one in Hangzhou, Ma's hometown and Alibaba's headquarters.

Media Asia invested in six film productions last year (including Huayi's Aftershock, 唐山大地震) and distributed eight in Hong Kong. While its losses were cut from HK$106 million (US$13.6 million) in 2009 to HK$46 million (US$5.91 million) in 2010, Media Asia was the only part of eSun's talent management, music, concerts and film library portfolio where revenues declined.

Sources close to eSun explained that the Ma investment is expected to allow Media Asia to focus on Hong Kong and international markets, while the new vehicle will concentrate on mainland China and Macau.

One explanation for Ma's decision to invest through Rojam, rather than directly in eSun, may be to avoid eSun's multi-billion dollar litigation over the building of Studio City, a casino and film-themed entertainment complex in Macau.

However, Yunfeng, Sina and the three other concert party investors, are prepared to pay a 74% higher price for their Rojam shares than eSun's PerfectSky vehicle.

Huayi last month announced a 76% increase in 2010 net profits to RMB149 million (US$22.6 million). Group sales revenues climbed 77% to RMB1.07 billion (US$163 million) with film and related revenues trebled to RMB624 million (US$94.8 million).

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