Viacom’s (viab) Paramount Pictures said a $1 billion movie funding deal with China’s Huahua Media has been scrapped after Beijing tightened foreign investment policies.
It’s the latest Hollywood-China tie-up to unravel due to regulatory pressure, following Wanda Group’s abandonment of a deal to buy production company Dick Clark Productions for $1 billion earlier this year.
Under an agreement announced earlier this year, Huahua Media and state-linked Shanghai Film Group were to provide Paramount with a $1 billion cash investment, giving the studio much-needed funds for growth.
The investment would have financed 25 percent of Paramount‘s movies in fiscal 2017 through 2019, according to the studio.
But the deal had been rumored for months to have run into obstacles with Chinese authorities, and in August and September Viacom and Paramount executives confirmed the funds had not been received.
“Paramount Pictures and Huahua Media have mutually agreed to end their slate financing agreement…following recent changes to Chinese foreign investment policies,” Paramount said in a statement on Tuesday.
Huahua Media could not be reached for comment.
China has stepped up scrutiny of what it sees as “irrational overseas spending”, especially in sectors such as entertainment, sports and real estate.
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In June, Beijing’s banking regulators ordered a group of lenders to assess their exposure to offshore acquisitions by a handful of companies that have been on overseas buying sprees, including HNA Group, Wanda Group, Anbang Insurance Group and Fosun International Ltd.
As a result of the crackdown on overseas deals, China’s non-financial outbound direct investment fell to only $78 billion in the first nine months of 2017, down 42% from a year earlier.
Huahua has partnered with Paramount on several films, including Transformers: The Age of Extinction and Star Trek Beyond. Shanghai Film Group (SFG) was an investor in Jack Reacher: Never Go Back.
Paramount said that the termination of the deal would lead to a charge of $59 million in Viacom’s fourth-quarter earnings, and that it had secured alternative financing agreements with toymaker Hasbro, Skydance Media and others to finance the production costs for the movies.
It is not clear if SFG is still involved in the deal. Paramount made no reference to SFG in its statement Tuesday. SFG didn’t respond to requests for comment.