Is Legendary's New China Deal for Real?

Thomas Tull, left, and Han Sanping

The three-year co-production deal with China Film Co. gives the company needed leverage as it eyes a new Hollywood partner.

The three-year co-production agreement announced May 30 between Legendary Entertainment’s Beijing-based Legendary East and the state-backed China Film Co. is the latest high-profile example of the uneasy alliance between the world’s two biggest film industries. But is it legit?

After all, this isn’t Legendary’s first headline-grabbing deal in China. Legendary CEO Thomas Tull launched Legendary East in 2011 amid much fanfare surrounding a reported 50 percent stake in the company taken by Hong Kong’s Paul Y. Engineering Group in exchange for a $220.5 million cash injection and a 9.9 percent stake held by powerful Chinese studio Huayi Brothers, which also was going to handle distribution for the company’s planned two releases a year.

Within a year, the deal fell apart amid reports of shaky investor confidence, and no film projects ever were announced.

This time around, insiders say the new alliance is a genuine coup thanks to the power and influence of China Film Co. and its chairman, Han Sanping, which is certain to help Legendary East CEO Peter Loehr attract the country’s burgeoning army of investors — a key objective.

Says an executive with extensive experience in China, “One never knows completely with China Film, but I believe Peter knows what he’s doing.”

The deal certainly comes at a pivotal time for Legendary, which has had success during recent years backing several Warner Bros. hits including the Hangover and Batman franchises, this year’s 42 and the upcoming Pacific Rim. With its Warners distribution deal set to expire in December and Tull said to be unhappy with the current arrangement, Legendary has been the subject of much Hollywood speculation over whether it will embrace a new suitor (Universal or another studio).

Legendary’s China deal now gives it added leverage in those talks. The company can count on having a multipicture partner that happens to be not only one of China’s most influential and resource-laden film entities but also one of only two licensees that can distribute imported blockbusters and have a say in how they are scheduled for release. With the new deal in place, Legendary could be spared the frustration it experienced in 2012 when The Dark Knight Rises underperformed in China after it was slotted to open the same week as The Amazing Spider-Man.

Even with these added release benefits, most observers agree the primary objective for Legendary is increased access to Chinese money. And if all goes well, there could be an even bigger target in mind — one that might signal aspirations beyond partnering with a U.S. studio to distribute films.

Says one veteran Hollywood exec of Tull’s intentions, “More and more, it feels like his plan is ultimately to attract such heavyweight capital that he can buy a studio — which could be very interesting to the Chinese.”