Vista gains Chinese backer, chance to launch in growing Chinese film market
Beijing Weying Technology Co (WePiao) is taking a 2% shareholding in Vista Group [NZX: VGL] International as part of a deal that will see the pair set up a new venture to tap into China's expanding film market and is expected to generate more than $30 million for the New Zealand cinema software provider in the first year.
Under the terms of the deal, which are both confidential and conditional on regulatory approval, Vista will provide the new venture with the distribution rights to all of its existing software including Vista Cinema, Veezi, Movio, MACCS and Numero.
WePiao will acquire up to 2% of new shares in Vista Group for cash at the volume-weighted average price of its shares in the prior month. It will also acquire shares in its China subsidiary, Vista Entertainment Solutions Ltd, Shanghai (Vista China), to provide growth capital for the business. As a result, Vista China will stop being a subsidiary under the proposed new venture arrangement and will be equity-accounted in future.
Vista China will enter a long-term distribution agreement for the existing Vista Group software and pay upfront fees for the rights along with annual maintenance and royalty fees. It gets the support of WePiao and its backers, the Wechat/Tencent Group, to help build its presence in the China film market, which is the fastest growing in the world.
Vista Group chief executive Murray Holdaway said the company had been committed to the Chinese market for some time and the deal would speed up sales of its core cinema product and its cloud-based product, Veezi, which is suited to the larger number of smaller cinemas in China, and launch its other products.
Holdaway said it may also lead to cooperation with Vista in other markets.
Vista estimates the deal will generate more than $30 million in the first year, excluding the cash from the sale of the 2% stake, and in year two there will be additional up-front fees and additional annual maintenance fees.
Approval from Chinese regulators for the share deals is expected to take up to three months and is also subject to WePiao doing due diligence on Vista China and no warranty breaches occurring in the interim period.
WePiao is backed by Tencent Holdings, along with the China Cultural Investment Fund and other investors, including some leading Chinese cinema chains. Its smartphone ticketing application is embedded in the WeChat messaging app, which has more than 600 million monthly active users, mainly in China.
Vista has more than 350 staff in seven offices in New Zealand, Australia, the US, the UK, the Netherlands and China and estimates that in excess of a billion cinema tickets are processed each year through its products.
The shares rose 5% to $5.04.
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