By Adam Jourdan
SHANGHAI (Reuters) - Canada-based cinema chain IMAX Corp said it planned to sell a fifth of its Chinese subsidiary to local investors, in a move that could help it eventually list the unit in Hong Kong.
The company, known for 3D projection, will sell 20 percent of IMAX China Holding Inc to investment fund China Media Capital and private equity firm FountainVest Partners as it looks to expand its theatre network in China and strengthen ties with local industry and government.
IMAX issued a statement late on Tuesday that confirmed a report from the Wall Street Journal earlier in the day.
The two Chinese investors will each pay around $40 million for stakes of 10 percent, with the first of two equal installments due on Tuesday and the second installment by early 2015, the statement said. IMAX will keep majority control.
China is the group's fastest-growing and second-largest market, accounting for around 20 percent of revenue, its 2013 earnings report showed. Sales in China rose 25.7 percent to $56.5 million last year, versus a slight dip in the United States.
"At this juncture, it makes sense to bring in Chinese investors to help us better address local market dynamics and further optimize our business in China," IMAX Chief Executive Richard Gelfond said in the statement, adding China was an "enormously complex market".
The cinema chain also confirmed that it planned to list its Chinese subsidiary, without providing further details.
China is fast becoming one of the world's major cinema markets, but the government closely controls the industry using quota systems and censorship of local and imported films.
IMAX, China Media Capital and FountainVest Partners could not immediately be reached for further comment.
The Wall Street Journal earlier reported that IMAX was aiming for a Hong Kong initial public offering in the next five years but had not ruled out a mainland listing in Shanghai or Shenzhen.
IMAX has over 170 screens in China and plans to open around 240 more over the next five years to tap a local box office, which China's film bureau put at around 21.8 billion yuan ($3.5 billion) last year.
IMAX is also looking to extend its reach into home theatre in partnership with Shenzhen-based TCL Multimedia Technology Holdings Ltd <1070.HK>.
China Media Capital, one of the potential investors, is headed by businessman Li Ruigang, who is also involved in a Chinese joint venture with U.S. film studio DreamWorks Animation SKG Inc .
($1 = 6.2123 Chinese Yuan)
(Editing by Christopher Cushing and Jane Baird)