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China Literature to buy TV, film producer New Classics Media

Chinese online publishing and e-book company China Literature Ltd. will acquire 100% of the share capital of New Classics Media Corp. in a transaction that values the TV and film producer at 15.5 billion Chinese yuan.

According to an Aug. 13 announcement, China Literature will acquire the shares from certain members of New Classics Media's senior management and Tencent Holdings Ltd.

Tencent owns a majority stake in China Literature. In March, the Chinese internet giant also bought a 27.64% stake in New Classics Media for 3.32 billion Chinese yuan from Beijing Enlight Media Co. Ltd.

"Further enhancing our content adaptation expertise is a natural next step for China Literature to unleash the commercial potential of our content library, drive integrated development of blockbuster titles, and enhance engagement of our writers and users," Wenhui Wu, co-CEO of China Literature, said in a statement.

The management of the TV and film producer will continue to lead the company's TV series, web series and film production business and will have the power to choose content, including those from outside of China Literature's platform.

China Literature will fund the deal with 5.1 billion yuan in cash and 10.4 billion yuan in stock. The transaction also includes an earn-out mechanism to align the long-term performance and incentives of New Classics Media's management.

The e-book company will issue its shares for the transaction at HK$80 per share. At the closing of the deal, the management of New Classics Media will receive approximately 40% of their consideration, or 1.5 billion yuan in cash and 2.6 billion in stock. The balance will be deferred and subject to future performance earn-out.

The acquisition is expected to be completed during the second half of 2018, subject to customary closing conditions and shareholder approval.

As of Aug. 13, US$1 is equivalent to 6.89 Chinese yuan.