Yili International (00585) plans to acquire 67% of Skyline VFX's shares for HK$171 million and return to the digital entertainment and AI media sector

According to Zhitong Finance App, Yili International (00585) announced that on November 5, 2026 (after the trading period), the buyer Imagi Venture (No. 1) International Limited (a wholly-owned subsidiary of the company) and the seller Chen Changfang signed a share purchase agreement. According to this, the buyer conditionally agreed to the acquisition, and the seller conditionally agreed to sell the shares at a total cost of HK$171 million.

The total cost will be paid in the following ways: (i) an amount equivalent to HK$342.791 million (i.e. cash cost) will be paid in cash; and (ii) an amount equivalent to HK$137 million will be paid through the allocation and issuance of shares under a general mandate.

At the time of completion and subsequent to completion, the seller and buyer will own approximately 33% and 67% of the total issued shares of the target company Skyline VFX Ltd.

As an incentive for the seller to achieve the target group's target revenue of not less than RMB 120 million, RMB 168 million and RMB 218 million for the financial years ending December 31, 2028, and December 31, 2029, respectively, according to the share purchase agreement, the company will issue a warrant to the seller upon completion, which grants the holder rights to the holder may be subject to the terms and conditions set out in the warrant documents and at any time during the exercise period of the relevant warrants, based on the target group's actual audited consolidated revenue for each target period and The target revenue ratio subscribes to the relevant number of warrants shares.

The Group gradually reduced its computer imaging business in the late 2000s, and by January 2016, the board of directors decided to develop a comprehensive financial services business. Financial services and investment have since become the Group's core strategy. Following recent changes in the company's shareholder base and the appointment of new management, the Board of Directors readjusted and updated the Group's long-term vision and strategy.

The board decided to seize emerging opportunities in digital production and AI-generated media and entertainment, enhance its existing digital entertainment business, and return to the company's original area of expertise. The Chinese film and TV drama market has changed significantly over the past few years. The development of generative artificial intelligence is changing content development, animation production, visual effects, and distribution methods, and AI-generated content has been widely accepted and popularized in the Chinese market. The Board believes that these developments, along with the growing size of the Chinese and global entertainment markets, are providing the Group with significant long-term opportunities to re-establish digital entertainment as its core business.

To refocus on the digital entertainment business, the board decided to implement this strategy by acquiring the target company, which is a mature player in the industry and has an experienced team. The target company is one of the market leaders in the field of visual effects production for film and television in China, and has a track record of nearly ten years. Well-known projects include the influential feature film “Fengshen: Morning Song”, “Project Panda”, “Under a Stranger” and “Changjin Lake”, as well as the acclaimed TV drama “The Three Bodies”. Target companies have also begun using the most advanced artificial intelligence technology in their development and production.

The acquisition is the first step in the Group's gradual transformation and rebalance its focus towards artificial intelligence empowering the media and entertainment business. The Group will not withdraw from the financial services business in the short term, and plans to implement this strategic transformation in a prudent and orderly manner, with the aim of managing execution risks and maintaining business continuity.

The directors believe that the acquisition will enable the Group to: accelerate the adoption of AI-enabled content development and production capabilities through mature operating platforms and experienced teams; develop new revenue streams in the AI-enabled media and entertainment sector, including content production, intellectual property licensing, distribution and other anticipated revenue streams; re-establish a meaningful business base in the Chinese digital entertainment market and participate in its long-term growth; and gradually expand from Hong Kong to the international market using the Group's Hong Kong listed platform and target company capabilities.

In view of the foregoing, the Board believes that the acquisition, including the allocation and issuance of consideration shares and warrants under general mandates, and the establishment of a joint venture upon completion, will help reposition the Group's strategic vision and be implemented immediately.