A story by Ada Shen originally written for Variety magazine:

Hong Kong's TOM Conglom Moves on Mainland Movies

Hong Kong tycoon Li Ka-shing's TOM Group Limited announced a strategic investment for a 35% stake in privately-owned, Beijing-based Huayi Brothers, one of the mainland's most commercially successful film and TV production companies.

The deal will bring an infusion of capital -- US $5 million in cash, and $5 million in convertible bonds -- to Huayi Brothers International Holdings Co. Ltd., which represents founding brothers' Wang Zhongjun and Zhonglei's diverse interests in film and TV production, distribution, talent management, music and advertising.

"This deal extends and complements TOM's already significant presence in China's Internet, wireless, publishing and outdoor advertising industries," said Kristian Kender, Research Director for CMMI, a Beijing-based media consultancy. "Most notably, a deal with Huayi Brothers should help [TOM] drive film and TV content to their CETV channel."

In May of 2003, TOM bought out AOL Time Warner's controlling interest in China Entertainment TV (CETV). The 24-hour Mandarin language TV channel gained national broadcast rights last year via China's satellite platform, Sinosat.

The Huayi Brothers deal is a continuation of TOM's China dreams of integrated media and entertainment assets.

Since their first foray into film in 1999, Huayi Brothers' Wang Zhongjun and Wang Zhonglei have built reputations as shrewd promoters and marketers of theatrical blockbusters, despite China's difficult domestic film market.

Under the Huayi Brothers and Taihe Film Investment Co., banner (HTF), the Brothers' output has included film fare with broad mainland appeal like Feng Xiaogang's holiday hits "Cellphone" and "Big Shot's Funeral", He Ping's "Warriors of Heaven and Earth", recent Golden Horse winner Lu Chuan's "Kekexili", and Stephen Chow's "Kung Fu Hustle" -- these titles were all coproductions with Sony/Columbia Pictures Film Production Asia.

According to the release, with the new investment from TOM and a 3% stake by China Equity Holdings, a leading venture capital firm, Huayi Brothers hope to either list publicly or find a Hollywood-based strategic partner within the next three years.

Changes in SARFT and Ministry of Commerce regs last month formally authorized foreign equity participation in mainland media companies, validating the recent spate of joint-venture film and TV production announcements between Warner Brothers and China Film Group, Sony Pictures Television International and Hualong Digital (a CFG company), and Viacom and Shanghai Media Group.

In the release, Huayi Brothers' Founder and Chairman Wang Zhongjun referred to his ostensible competitors.

"Currently, the few joint ventures in the industry are start-ups, limited to cooperation between state-owned enterprises and foreign enterprises," he said. "We're [already] growing steadily, and this year we'll have revenues of over 100 million RMB at 20% net profit. With TOM's ample experience in diversified media holdings, we are very excited that this partnership will bring broader opportunities to both companies."

The announcement coincides with the Shanghai premiere of HTF's latest Feng collaboration, the Andy Lau-starrer "A World Without Thieves". The US $5 million feature marks their Huayi Brothers' first coproduction outing with Hong Kong-based Media Asia (producers of the "Infernal Affairs" trilogy).

"Huayi Brothers has a track record of box-office sucess, and is a top player in China's entertainment industry," said TOM CEO and Executive Director Sing Wang. "Our investment is both logical and synergistic to our existing business portfolio. Huayi Brothers brings us access to the most exciting talent in China today."