22 January 2016

Dalian Wanda’s Hollywood ambitions

Dalian Wanda started out as a real estate developer and currently owns numerous high profile properties, such as plazas and hotels throughout China. In recent years, however, it has grown its footprint in other sectors to become a more diversified conglomerate, adding entertainment and tourism businesses to its portfolio.

Last week, the group acquired Jurassic World and the Dark Knight producer Legendary Entertainment for about USD 3,500 million in cash, making it one of the most notable US deals completed so far this year, according to Zephyr, the M&A database published by Bureau van Dijk. Telecommunication giant Softbank and investment manager Waddell & Reed Financial were among the vendors. Following the transaction, Dalian Wanda intends to merge the American company with its movie producer in China and take the combined unit public.

As Legendary’s upcoming Matt Damon film “The Great Wall” is based substantially on Chinese culture and history, some media reports have tried to establish a link between China’s push for global cultural influence and Dalian Wanda’s purchases in the entertainment sphere abroad. In 2011, the Communist Party of China announced its intention to boost soft power internationally, following the sixth plenary session of the 17th Central Committee. It is also noteworthy that some Dalian Wanda shares are held by affiliates of powerful political figures in China, according to a New York Times report.  However, Chairman Wang Jianlin denied the connection and clarified that the Legendary acquisition was solely for his business interests.

The purchase is certainly not the first eye-catching deal in show business involving Dalian Wanda. Three years ago it took over US-based AMC Entertainment for approximately USD 2,600 million, making Dalian Wanda the largest cinema owner in the world. The 2012 transaction, which was facilitated by Citigroup and JP Morgan, provided an exit to private equity giants such as Carlyle, Bain and Apollo. The buyer subsequently went on to list AMC on the New York Stock Exchange in 2013, raising USD 379 million in the process. Furthermore, as recently as last year, Dalian Wanda bought Australian cinema chain Hoyts Group for USD 366 million in cash, which was part of its plan to tap into the movie market down under.

Dalian Wanda’s acquisitions came amid a more welcoming reception in developed countries towards China’s investments. The Economist cited Chinese owners being more hands-off with their subsidiaries as one reason for the change in attitude, which is in line with Wang’s decision to retain the management teams of Legendary and AMC.  Wang also claimed that many American movie studios eager to sell stakes have approached him. This is unsurprising, as an alliance with Dalian Wanda would give companies more access to a very lucrative movie market, considering that China’s box office is set to surpass the US, according to the Motion Picture Association of America.

It will be interesting to see what is next to come for Dalian Wanda. With a cooling property market in China, further business diversification may likely be one of the firm’s objectives. After the Legendary acquisition, Wang touched on the possibility of an even bigger takeover by his group within the entertainment world. It is thus clear that he has no plans to slow down. Given that, we can expect to see more headline-grabbing deals in this industry down the road. But for now, there is still one transaction to look forward to in the short term - the Legendary IPO.

© Zephyr