Legendary's China venture faces funding delay
The film finance and production company's new venture to make movies in the world's most populous nation has been unable to raise $220.5 million on the Hong Kong Stock Exchange this year as it had planned, according to a regulator filing. It will have to retry the effort in 2012.
Legendary East, which was formed last summer by Legendary Entertainment Chairman Thomas Tull, had aimed to sell shares through a shell company, Paul Y. Engineering Group, that is already publicly listed in Hong Kong. But in a regulatory filing Friday, PYE said, "Although the placing has received a positive and substantial response, it was not sufficient to complete the placing."
The filing blamed "current difficult conditions of the capital markets" along with "volatility in the global markets."
Under PYE's agreement with Legendary East, the funds had to be raised before the end of the year or the deal would be terminated.
A spokeswoman for Legendary East said the venture's goal is "to relaunch a placing exercise in 2012." A person familiar with the deal but not authorized to speak publicly said the venture is aiming to raise the funds next year under a similar structure to the previously announced deal with PYE.
Legendary East is looking to produce one or two English-language movies per year in China based on local culture that would be distributed globally, much like big-budget event films made in Hollywood. Its first project is expected to be "The Great Wall," which will be directed by "The Last Samurai" director Edward Zwick and tell the tale of the history of China's famous stone structure.
The Asian film company was looking to kickstart operations with the $220.5 million that it would offer in exchange for 50% equity in the company. An additional 40% would be owned by Legendary Entertainment, with the remaining 10% going to distribution partner Huayi Brothers International. Legendary East also expected to get $35 million from a private equity firm controlled by its chief executive, Kelvin Wu, and to raise a $225 million credit facility.
Tull is chairman of Legendary East.
It remains to be seen whether the funding delay will impact the venture's plans to start making movies in 2013.
-- Ben Fritz
Photo: Chinese film producer and wife of Rupert Murdoch, Wendi Deng Murdoch, left, Legendary Pictures Chairman Thomas Tull, center, and Mike Medavoy, chairman and CEO of Phoenix Pictures. Credit: Associated Press