As more film and TV production firms continue to spend big on inking deals with star-founded firms, China's securities regulators have increased their scrutiny, especially pointing out high-priced acquisition agreements, the Global Times reported.
Analysts see this is one prime reason why Shenzhen-listed Zhejiang Talent Television and Film Co. abandoned its plan of purchasing the company founded by Chinese star Fan Bingbing last month.
According to the firm's filing on the Shenzhen Stock Exchange on June 24, the parties decided to terminate the deal after it failed to reach an agreement with Fan's Wuxi Aimeishen Movie and Culture.
Previously, Zhejiang Talent eyed to acquire 51 percent of the actress' firm via a major asset restructuring deal. The partnership earned the ire of many after it was reported that the deal valued Aimeishen for over 800 million yuan, which is a very high premium especially for a newly established firm that has 3 million yuan worth of registered capital.
The Chinese National Enterprise Credit Information Publicity System, which operates under the State Administration for Industry and Commerce, stated that Aimeishen only received regulatory approval on Jan. 29, with Fan and her mother as the firm's only shareholders.
It was in April when Shenzhen securities regulator initiated an inquiry as to how Zhejiang Talent's deal was able to shoot up Aimeishen's value.
The past years have seen Chinese talent agencies as well as production houses spend big time just to have a share on firms built by stars and popular stage and screen personalities.
Experts noted that these firms have been eyeing to capitalize on the careers of these talents-turned-company founders.
According to Oliver Rui, a professor at the Shanghai-based China Europe International Business School, companies are spending huge amounts because they are "actually paying for the stars."
"For the film and TV industry, intangible assets like stars are much more important than tangible assets, as they have the capacity to create value in the future," Rui remarked.
Fan was ranked as the world's fourth highest-paid actress in the world, as reported by Forbes magazine. She is also Zhejiang Talent's 10th largest shareholder.