China’s Tencent acquires minority stake in Skydance Media

Shenzhen-based social media giant Tencent Holdings has acquired a minority stake in Los Angeles-based production company Skydance Media, the companies said Thursday, in a move that bucks the recent trend of Chinese companies avoiding Hollywood investments.

Tencent, which owns social apps such as WeChat and QQ, has purchased a stake of 5% to 10% in Skydance for more than $100 million, according to a person familiar with the deal who was not authorized to comment.

The deal gives Skydance, founded by David Ellison (son of Oracle founder Larry Ellison), a powerful partner with massive reach among online consumers in China, the world’s second-largest movie market. Along with marketing prowess and capital, the investment gives Skydance access to Tencent’s expertise in the gaming industry, the companies said.

As part of the pact, Tencent will be able to invest in Skydance films, the companies said. Skydance, launched in 2010, is best known for blockbusters including the recent “Mission: Impossible” and “Star Trek” movies. The company is also investing heavily in television production, gaming and virtual reality.

“We believe this partnership will support Skydance’s expansion internationally, across media and into television production, and provide Tencent with attractive content that we can share with China consumers,” said James Mitchell, chief strategy officer for Tencent, in a statement.

China’s box-office sales rose to $8.47 billion last year, up 13% from 2016, according to film industry consulting firm Artisan Gateway. China’s ticket sales grew only 4% in 2016, marking a substantial slowdown from previous years.

Chinese investment in Hollywood came to a virtual standstill last year as the government there cracked down on what it saw as irrational investments in foreign industries, including entertainment, by companies such as Dalian Wanda Group.

But Tencent has managed to remain unscathed by the clampdown, maintaining a lower profile than many rivals. The company backed Burbank-based start-up studio STX Entertainment in 2016 and has invested in films such as “Wonder Woman.” In November, Tencent acquired a 12% stake in Snapchat owner Snap Inc. for $2 billion.

Tencent also backed Original Force animation, a Chinese animation company that tried to expand in the U.S. with feature films. Sandra Rabins and Penney Finkelman Cox, the executives hired to lead the charge, left the company in August.

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