Alibaba, Tencent raise stakes in Huayi Brothers

A Chinese moviegoer walks at a branch of HBC (Huayi Brothers Cinema) of Huayi Brothers Media Corp in Shanghai, Dec 19, 2013. [Photo/IC]

Tech giants Alibaba Group and Tencent Inc are set to invest a combined 2.8 billion yuan ($457.43 million) to raise their stakes in Huayi Brothers Media Corp, China's largest private film company. The move signals that China's largest Internet players are making inroads into the entertainment sector.

After the completion of the purchase, the aggregate shares that Huayi executives hold will fall to 26.99 percent. Alibaba and Tencent will each hold 8.08 percent of shares, each becoming the second-largest shareowners.

Huayi Brothers plans to raise up to 3.6 billion yuan ($588 million) through a private placement. The company will use the fund to invest in movies, TV series and repay bank loans, according to its filing to the Shanghai Stock Exchange.

The entertainment conglomerate issued 145 million shares priced at 24.83 yuan per share, 105 percent of its average trading price. Alibaba will subscribe 61.76 million shares in an amount of 1.53 billion yuan, and Tencent, China's largest social network that owns popular WeChat messaging service, will purchase 51.55 million shares with 1.28 billion yuan. Besides, Ping An Insurance Group and Citic Construction Co Ltd will raise their stakes in Huayi Brothers as well.

In addition to the subscription, Alibaba and Huayi Brothers signed strategic alliances for further collaboration. The two companies will strengthen cooperation in the film-making and gaming business. In the next three years, the two sides will collaborate on 10 films that will be launched on Alibaba's Yulebao, a monetary fund, to let Chinese invest in upcoming films, according to the filings.