(Bloomberg) -- Cinedigm Corp., a digital distributor of movies and other programming, jumped the most in three months after striking a deal to release films online and in theaters in China.
The agreement with Starrise Media Holdings Ltd., a former textile company that entered the media business two years ago, sent shares up as much as 14 percent.
The agreement also sets the stage for Los Angeles-based Cinedigm to distribute Chinese films in North America and to work on co-productions with Starrise, according to a Cinedigm statement Friday. Television and other short-form programming may come later, potentially distributed on new online streaming channels in China.
China-Hollywood alliances had been proliferating until the last year following a Chinese government crackdown on foreign investment, including transactions with U.S. entertainment companies. Cinedigm’s $40 million deal in June to sell a majority stake to Hong Kong-based Bison Capital was one of the rare China-Hollywood deals to get completed in the past year, securing approval in Beijing and from U.S. regulators in November, even as Washington lawmakers have increased scrutiny of Chinese investments.
Cinedigm shares have tumbled since that agreement was announced, and the company was valued at $47.4 million at Thursday’s close.
The deal with Starrise is “an important step in implementing our plan to become the first true China/North American studio, strongly and uniquely positioned for high-quality content distribution and OTT channels and services in both hugely important territories,” Cinedigm Chief Executive Officer Chris McGurk said in the statement.
While Chinese box-office growth has slowed in the past few years, it is continuing to expand, with more theaters opening. The market is forecast to overtake stagnating U.S. box office sales in coming years as the world’s biggest.
Cinedigm, which started out as a company that helped cinemas convert to digital movie projection, has in recent years remade itself into an online distributor of niche and feature films to digital platforms such as iTunes, Netflix Inc. and Amazon.com Inc., as well as cable and satellite providers. It has online channels including CONtv, for the Comic Con Network.
Starrise, which trades on the Hong Kong stock exchange, was known as Silverman Holdings until July, when it announced it would get rid of its fabrics unit and change its name to reflect its focus on film and television, a business it entered through an acquisition in 2015. Its credits in China include television dramas “Eastern Battlefield” and “Yichang Defense.”
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