(Yicai Global) August 1 -- Real estate developer China Calxon Group's board has passed a resolution to buy a 100 percent stake in Beijing Startime Cinema Investment and EMMY (Beijing) Cinema Investment, it announced yesterday.

This means Hangzhou, Zhejiang province-headquartered Calxon will move into the culture and tourism sector, which is also key to resolving its competition with its affiliated Shenzhen-based Evergrande Real Estate Group, analysts believe.

Calxon said it will delegate the acquisition to its wholly-owned unit Calxon (Shanghai) Internet Technology with an 'equity + debt' payment arrangement soon after its July 12 announcement that it had agreed to acquire the two movie theaters.

The real estate developer has set its sights on a 100 percent stake in Beijing Startime for CNY565 million (USD83 million), with equity consideration of CNY272 million and debt of CNY293 million.

The company plans to purchase a 100 percent stake in EMMY via equity + debt for CNY30 million, involving equity of CNY105,300 (USD15,450) and debt financing of CNY29,894,700.

Beijing Startime reportedly holds a 100 percent stake in Beijing Startime Digital Cinema which qualifies to legally operate cinemas. It runs 18 self-owned movie theaters and 24 franchised ones.

Beijing Startime has also obtained its own film distribution operating license from relevant Chinese authorities. 

Calxon's actual controller Xu Jiayin and controlling shareholder Guangzhou Chiron Real Estate issued a letter of commitment that they will not operate new cinema businesses that compete with Calxon.

Evergrande Real Estate acquired Calxon in 2016, Xu and Evergrande promised at that time to solve problems of horizontal competition in three years and help Calxon cultivate new businesses, analysts said. The acquisition will thus be key to solving the issue of rivalry between Calxon and Evergrande, both of which Xu controls.

The whole series of transactions is a classic case of collar your competitor, then put him out to pasture to avoid having two bulls in the pen.

Editor: Ben Armour