Private Equity China Media

Private Equity Firms Investing in China’s Media

I came across an interesting article this morning suggesting that China’s media sector will be a “magnet” for private equity.  Considering well-known China’s tight hold on the media, this carries some risk but high potential returns if the government relaxes its policies.  According to Reuters, “More than a dozen private equity funds…are raising local currency yuan-denominated funds, likely worth over billions of dollars, to invest in media-related sectors.”  

The funds are yuan-denominated because foreign investors can’t invest in domestic mass media. These funds are launched with the expectation that China’s media will turn into a very profitable industry in the next few years and they will be on the ground floor.  Several US venture capital and private equity funds have already made moves to enter this sector but it’s unclear whether it will live up to predictions.

“The logic of the deal is very simple — You invest ahead of its IPO and you believe the media market in China is going to have big potential in the next few years,” said one private equity source close to Hony, which counts the Bill & Melinda Gates Foundation Trust as an investor in a dollar fund.

Also, in December, a consortium led by U.S. venture capital giant Sequoia Capital invested over 100 million yuan in GreatDreams, a leading Chinese cartoon film maker and designer. Sequoia invested in the firm via its local yuan fund.

Officials at the General Administration of Press and Publication and the Propaganda Department, two main ministries with powers to regulate China’s media industry, have said Beijing supported some major state-run media firms tapping capital markets for business expansion, according to state media reports.

However, under current Chinese rules, foreign investors are not allowed to invest in domestic mass media companies, making it difficult for many global U.S. dollar-denominated private equity funds to invest in the fast-expanding media industry in China.  Source

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Tags: china media, chinese media investment, china’s media firms, media in china, private equity investment in china, chinese media, chinese foreign investors

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