|mwaniki wanjiku |||Jan 28, 2017 12:13 PM EST|
(Photo : Getty Images) The move comes as China's film industry is expected to pick up this year after a lacklustre 2016.
Cinema operator Orange Sky Golden Harvest (OSGH) has agreed to sell its theatres in mainland China to the country's second-largest exhibition group, Dadi.
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The sale of the pan-Asian cinema operator's theatres is one of the clearest signs of the turmoil in China's cinema sector following the sudden and unexpected box-office slowdown last month.
Theatrical receipts in China experienced a less than four percent growth in 2016, raking in $6.62 billion. Admissions grew by eight percent.
Nan Hai, a Hong Kong-listed firm and Dadi Digital Cinema's parent company, will pay up to $417 million for a 93 percent stake in Orange Sky Golden Harvest's China business.
OSGH's China division has 76 theatres in China with a total of 531 screens.
Last year, Dadi reported that it has operating 350 theatres in 164 towns and cities. The company reported a combined 1,911 screens.
After the sale, OSGH will be left the operator of a small circuit of wholly-owned cinemas in Hong Kong. OSGH will also be the majority owner of the Vie Show chain in Taiwan. The company will further have a 50 percent joint-venture partnership in the Golden Village cinema chain in Singapore.
Taking advantage of the Closer Economic Partnership Agreement, OSGH was one of the first Hong Kong-based groups to construct cinemas in China.
The Closer Economic Partnership Agreement allows Hong Kong companies to control majority stakes. The agreement limits foreign companies to minority positions.
The Chinese business was OSGH's biggest in terms of the number of cinemas and investment.
"As Dadi's cinemas focus on smaller Chinese cities from tiers two to four, this deal will greatly supplement our current network in China, and further strengthen our market position," said Yu Xin, chief executive officer of Dadi.
Dadi has been seeking financial support from investors.
Last year, Dadi sold $154 million worth of convertible bonds to Alibaba Pictures Group.
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