August 31, 2017 / 6:39 AM / a year ago

Chinese magnate revamps Hollywood deal amid crackdown on overseas investment

BEIJING/SHANGHAI (Reuters) - A Chinese magnate, known for the purchase of English soccer club Aston Villa, has revised a plan to buy the majority of a Hollywood studio for $100 million due to increased government scrutiny over outbound deals in the entertainment sector.

FILE PHOTO: Recon Group CEO Tony Xia attends a news conference for Recon Group’s acquisition of soccer club Aston Villa in Beijing, China, July 18, 2016. REUTERS/Jason Lee/File Photo

Tony Xia said in a tweet on Thursday he would no longer conduct the acquisition via his listed firm Recon Wenyuan Cable Co Ltd, but through a separate non-listed entity due to a “new Chinese policy of film industry restriction.”

The government has been tightening regulation following big-money deals overseas, especially in areas such as film, sports and real estate, due to concern about high levels of debt.

It has also restricted the export of capital to deter investment abroad, particularly in sectors unrelated to a firm’s core business, in the hope of stemming depreciation of the yuan.

In February, Recon Wenyuan said it planned to spend up to $100 million to buy 51 percent of Millennium Film, whose productions include “The Expendables”.

On Thursday, it said interested parties would not pursue the deal as it could not be completed before a previously agreed deadline of Aug. 31.

Later on Thursday, Xia retweeted a Twitter post stating Xia had dropped the deal, and attached a comment saying the post was not accurate and that another entity would “continue the deal”.

Xia is not the first magnate to cut a listed firm from a deal. Gao Jisheng’s Lander Sports Development Co Ltd pulled out of a deal for English soccer club Southampton in April, before completing it independently earlier this month.

China’s cabinet issued rules on acquisitions abroad for the first time this month, possibly signaling a further slowing of funds that have flowed overseas in recent years. Thomson Reuters data showed outbound mergers and acquisitions this year fell 42 percent as of Aug. 14 versus the same period last year.

Reporting by Pei Li and Adam Jourdan; Editing by Christopher Cushing

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