Top Entertainment Broadcaster to Make Backdoor Listing

(Beijing) - The media group behind China’s best-loved variety shows has scripted a backdoor listing, casting some of its most valuable subsidiaries as new stars to sex up its publically traded shopping channel unit.

Hunan Broadcasting System’s (HBS) Mango Media, China’s second most-viewed broadcast and film group after state-run CCTV, is preparing to inject five of its most successful entertainment companies into its sole listed subsidiary, Happigo Home Shopping, according to a filing by Happigo on Monday.

The move would provide a strong boost to Happigo, a 24-hour broadcast and online retailer that sells everything from diapers to refrigerators, but has taken a hit from newer live streams on shopping and other high-tech forms of product promotion in recent years. The company’s operating profit fell 75% last year, while revenues rose by just 15%, according to Happigo’s 2016 financial statement.

Mango Media is the main unit of HBS, and was formed as part of a market-oriented overhaul by its parent in 2010. With a few exceptions, television and radio stations in China are traditionally state-owned due to their strong influence on society. Many companies from a newer generation of web-based broadcasters are private, but are still subject to strong government oversight from Beijing.

A backdoor listing would provide important new funding channels for Mango, which produces buoyant programs aimed at younger crowds, in sharp contrast to many other traditional state-run broadcasters. That would allow Mango to better compete with some of the top private sector internet-based players including Tencent Holdings Ltd.’s video unit and iQiyi, which is backed by online search giant Baidu Inc.

The backdoor listing would see Happigo acquire Mango TV, Mango Media’s online streaming site and an app that exclusively hosts HBS’ content, such as variety shows and TV series, with over 400 million daily viewers. As part of that process, Happigo would typically pay for the purchase by issuing new shares to HBS and Mango, which could sell those shares to raise cash.

A recent funding round by Mango TV last June valued the company at $2 billion, and many of the company’s investors have state-backing.

Mango Media’s other companies that would be injected into the Shenzhen-listed Happigo include EE-media, a talent agency and producer of reality competition shows; a developer of reality show-inspired mobile games; the studio producing many of Mango TV’s hit teenage dramas; and another filmmaking unit.

Happigo’s shares have been suspended since April.

Contact reporter April Ma (fangjingma@caixin.com)