Orange Sky Golden Harvest’s China Operations Bought by Dadi Cinema

The purchase is the latest sign of consolidation in China’s cinema market and a fillip for OSHG investors Huayi Brothers and Alibaba Pictures Group in their battle with market leader Wanda Cinema Line.

Pan-Asian cinema exhibition group Orange Sky Golden Harvest (OSGH) has sold its entire China operation to Dadi Cinema Construction, the companies announced Wednesday.

Dadi Digital Cinema Corporation, the second-largest theater chain in China, said it was buying the operations for RMB 3.387 billion (US$492.4 million).

Orange Sky Golden Harvest, which operates cinemas in Taiwan, Singapore, and Hong Kong, was one of the first companies to operate multiplex cinemas on the Chinese mainland.

It currently operates 76 cinemas with a total of 531 screens, covering 36 cities across the country. It had an attendance of over 24.6 million, and box office sales of RMB 808 million ($117.4 million).

However, OSGH has been unable to make a profit in China amidst the recent slowdown of the theatrical box office. In September last year, the company abandoned plans for expansion in the country and dropped proposed investments from Beijing Weiying (aka Wepiao,) and media investor Beijing Qing Zhong Tong Chuang Asset Management.

“With Orange Sky Golden Harvest’s cinemas mainly covering first and second tier cities, and Dadi Cinema mainly covering second and third-tier cities, this arrangement is very complementary,”  Yu Xin, GM of Dadi Cinema said in a statement.

At the end of 2016, Dadi Cinema owned 350 cinemas with a total of 1,911 screens, covering 164 cities nationwide.It had attendance over 73.25 million, and box office sales that reached $348 million (RMB2.2 billion) in 2016.

The deal will result in Dadi cinema having 426 cinemas across the country with 2,442 screens.

Earlier this month Huayi Bros. Media, one of China’s largest movie groups, confirmed that it paid $11.5 million for a 4.6 percent stake in Dadi Cinemas.

That followed an announcement from Alibaba Pictures Group in May 2016 when it announced it was investing $154 million (RMB 1 billion) in convertible bonds issued by Dadi Cinema Construction.

Earlier this week, AMC Entertainment, the U.S. theater chain owned by Wanda, said it was paying $929 million for the Nordic Cinema Group.

Huayi Brothers and Wanda Cinema Line have been at loggerheads over Wanda’s apparent decision to limit screenings of Huayi films such as I Am Not Madame Bovary (我不是潘金莲) and Rock Dog (摇滚藏獒).

Industry watchers continue to speculate that the reason for the underwhelming screening arrangement is Wanda’s way of exacting revenge on Huayi Brothers for successfully poaching executive Jerry Ye (叶宁) from them in March last year.

However, before Wednesday’s announcement, Jerry Ye gave an interview to the Beijing Morning Post downplaying the rivalry between the two companies and suggesting more cooperation between the two in future.