IMAX sells stake in China subsidiary, eyes IPO

The Toronto-based exhibitor lined up strategic investors for a 20% holding ahead of IMAX China going public within five years.

IMAX CEO Richard Gelfond has been laying down roots in China for his giant screen exhibition business for 15 years.

On Tuesday, the IMAX topper unveiled a deal to sell a 20% stake in a IMAX China subsidiary to local investors, with an eye to eventually taking the Chinese unit public.

“We are strategically aligned with these Chinese investors to grow the business with the goal of taking IMAX China public in China within five years,” Gelfond told analysts during a morning call after news of the Chinese investment broke.

IMAX China will receive an $80 million cash injection from two strategic investors, CMC Capital Partners, a Chinese investment fund run by Ruigang Li, a major media investor in China, and FountainVest Partners, a China-focused equity fund.

The investors will make their minority investment in two installments, $40 million on April 8, 2014 and another in one year on April, 8, 2015, subject to certain closing conditions.

Imax is aiming with the strategic investments at an eventual IPO of IMAX China within five years to raise $900 million to $1 billion, Gelfond told analysts on Tuesday.

IMAX  has already built a business of 173 screens in China, and another 237 in backlog and waiting to open, as of Dec. 31, 2013.

Gelfond told analysts that the strategic investors have the local knowledge of government and market players to allow the Canadian-based company to make further inroads into the Chinese markets, given its upside potential and risks.