Transformation for State-owned Shanghai Media

Shanghai Media & Entertainment Group has officially transformed itself from a State-owned administrative institution to a corporation and merged into a new media and entertainment conglomerate in partnership with Shanghai Media Group, one of its wholly owned subsidiaries. [Photo / dfic.cn]

Shanghai Media & Entertainment Group has officially transformed itself from a State-owned administrative institution to a corporation and merged into a new media and entertainment conglomerate in partnership with Shanghai Media Group, one of its wholly owned subsidiaries.

News of the moves came in announcements released by its two listed companies on Sunday.

Established in 2001, Shanghai Media & Entertainment Group is a cultural and media company with major operations in television and film.

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Its subsidiaries include Shanghai Media Group, Shanghai Film Group, Shanghai Oriental Pearl (Group) Co Ltd and SMG Performing Arts Group.

Shanghai Media Group was set up in 2009, a move that symbolized the separation of production and broadcasting of content in the Shanghai broadcasting industry.

The two listed subsidiaries belonging to the new conglomerate, BesTV New Media Co Ltd and Shanghai Oriental Pearl (Group) Co Ltd, saw their shares sink on Monday on news of the restructuring.

The statements didn't offer any details about the reorganization and integration of the two listed companies, except to say that SMG will work the issue out according to the position of the two companies in a market-oriented way.

Li Ruigang, former president of SMG and the chairman of the newly established conglomerate, earlier told a company meeting that he will try to leverage the two companies as financing platforms to further the group's development.

The integration is in line with the general trend of State-owned enterprise reforms. It has been on Li's agenda for a long time.

"The competition for resources among SMG's different affiliates is fierce because of the lack of an overall development plan from the parent company," said Shao Gang of the Horizon Research Consultancy Group in Beijing. "It's detrimental to SMG's long-term development."

SMG has a wide range of businesses, from new media to entertainment, animation and film production and even online shopping.

Guotai Junan Securities Co has estimated the value of SMG's unlisted assets at between 1 billion yuan ($161 million) and 1.2 billion yuan.

Li said previously that he is opposed to the many directions that SMG's subsidiaries have taken. He said the group should have an overall diversification strategy.

"The internal risk is stronger than the external challenges when it comes to the restructuring of assets and resources within the new conglomerate," said Shao.

"Coupled with the relatively rigid system as a State-owned enterprise, the integration of internal resources among a variety of subsidiaries would be a major challenge for them, because these subsidiaries used to develop independently and had few business connections with each other," said Chen Shaofeng, vice-dean of the Institute for Cultural Industries at Peking University.