Online publisher China Literature, a subsidiary of Tencent, has the ambition of becoming the next Marvel. Its controversial acquisition of Shanghai-based production company New Classics Media is a way of getting there, CEO Wu Wenhui said in a recent interview.
The Hongkong-listed company’s RMB 15.5 billion deal (roughly US$2.3 billion) with New Classic Media was at that time questioned by market analysts for its high acquisition premium. China Literature’s stock price has nearly halved since the announcement of the deal last August.
But Wu Wenhui, whose humble online literature website grew into a market leader in online publishing with about 1,700 full-time employees, defended the acquisition in an interview this week with 36Kr, KrASIA‘s parent company.
“Whether the acquisition of New Classic Media is right or wrong, even if it’s a trial-and-error experiment, it’s worth it,” Wu said. “If we can succeed, we could be on the way of becoming Marvel, for which the price is worthy.”
So far the deal is showing signs that it’s paying off. TV smash hits produced by New Classics Media have helped generate huge traffic for China Literature’s reading platform. According to China Literature’s annual report, daily sales of the online novel Ruyi’s Royal Love in the Palace witnessed nearly 400% growth after being adapted to a TV series.
The Chinese online literature conglomerate recorded RMB 5.04 billion (US$734.1 million) revenue in 2018, a 23% annual increase from the previous year. New Classic Media contributed RMB 275.3 million in revenues and RMB 67.9 million in net profit since the acquisition completion last October.
Additional reporting by Hang Honggang.
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