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STX Entertainment Secures Funding From China's Tencent And PCCW

In a further sign of Hollywood's deepening ties with China, startup studio STX Entertainment has secured major strategic investments from Chinese technology giant Tencent and Hong Kong-based telecommunications firm PCCW.

Burbank-based STX announced the deal Thursday and said it would help finance the expansion of its television and digital businesses.

The company did not disclose terms, but a person close to the company said the new investments, including a recent increase to STX’s credit facility, will give the company access to about $700 million in new capital for its planned expansion. The transaction values STX at $1.5 billion, said the person, who was not authorized to comment.

The transaction marks the latest investment in Hollywood from China, which is growing its clout in the film, TV and media industries. 

“STX has been at the heart of the Hollywood-China relationship from its inception,” said Lindsay Conner, an entertainment industry lawyer and partner in the firm Manatt, Phelps & Phillips. “This represents a further extension of a business plan that takes advantage of the relationship between Hollywood and China.”

The investment in STX is among a string of entertainment deals by Tencent, which operates the popular social media network WeChat and is a major player in gaming, online video and Internet media.

Tencent launched a new TV production joint venture with IM Global  in June. It also created a joint venture with talent agency WME-IMG and Sequoia Capital China. Additionally, Tencent is backing Culver City-based animation studio Original Force Animation, which is operated by two former DreamWorks Animation executives.

Tencent, based in Schenzhen, has also made a name for itself as a big investor in mobile gaming. Last year, it acquired a majority stake in the L.A.-based Riot Games for $400 million and invested $126 million for a 15% stake in San Francisco’s Glu Mobile. The company recently struck a $8.6 billion deal for Finland’s Supercell Oy.