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STX to Finalize Investment From China’s Tencent

Internet giant owns WeChat, China’s most popular social media app

STX Entertainment has crossed the Pacific for cash once again, as it secures a new round of financing that includes China’s Tencent, a source with knowledge of the transaction told TheWrap. Joining one of the largest internet and media companies in the world’s second-largest movie market is Hong Kong telecom and media company PCCW, which is also investing.

Producer Robert Simonds formed STX in 2014 with plans to produce eight to 10 medium-budget films a year, signing direct distribution agreements with America’s four largest cinema chains. The company’s founding investors also included U.S. private equity firm TPG and Chinese private equity firm Hony Capital, which invested $65 million in STX at the time and remains its third-largest shareholder.

And last March, STX signed a co-financing deal with China’s Huayi Bros. Media for at least 18 films that the studio said would allow it to up its annual quota to 12 to 15 films and spend upwards of $1 billion a year producing them.

While “Bad Moms” has delivered $52.8 million in domestic box office receipts so far on a $20 million budget, STX has suffered one significant flop this year. Its Matthew McConaughey Civil War drama “Free State of Jones” has made only $20.8 million at U.S. theaters despite its estimated $50 million budget.

Hony’s investment in STX was the first by a Chinese company in a U.S. film studio, which was a harbinger of things to come in Hollywood. Studios from Lionsgate to Universal subsequently signed co-financing deals with Chinese media partners, and in January, Dalian Wanda Group became the first Chinese company to own a major American production company outright, when it bought “Jurassic World” producer Legendary Entertainment for $3.5 billion.

Tencent, which along with Wanda has shown interest in acquiring a minority stake in embattled Paramount Pictures, owns WeChat, China’s most popular mobile app, which is also a popular way to buy (discounted) movie tickets in the Middle Kingdom.

In April, STX launched an international division based in London as well as an unscripted TV division.