In the span of less than a year, Dalian Wanda Group Chairman Wang Jianlin has gone from splashing billions on entertainment companies and coming to Hollywood to promote an $8 billion mega-studio and telling film execs they need to “increase their quality” to selling off his theme park business and 77 hotels as part of a major, regulatory-driven retrenchment.
And as one of China’s richest and most powerful men has quickly become one of its most scrutinized, that’s put the squeeze on Wanda’s would-be acquisition spree — the company has announced $20 billion in deals since 2006 — and led to a flurry of surprise deals and restructurings over the past two weeks as the once freewheeling conglomerate looks to get its debt under control.
Since the action has been fast and furious — and often in the middle of the night Los Angeles time — here’s a refresher on what’s been going on with one of China’s most important companies (and the world’s largest cinema owner):
Wanda burst on the scene buying up Hollywood trophy assets by the billion, including its $3.5 billion purchase of “Kong: Skull Island” production company Legendary Entertainment last January, but a crackdown by Chinese regulators effectively put a clamp on its firehose of investment. Currency controls and a government that balked at the $1 billion price tag helped to kill Wanda’s would-be acquisition of Golden Globes producer Dick Clark Productions, which TheWrap exclusively reported earlier this year.
And Wang has apparently yet to regain favor among China’s economic gatekeepers, as the Wall Street Journal reported Monday that government regulators met with executives from several state-owned banks to ban them from making loans to Wanda to finance cross-border deals, also informing the bankers that six of Wanda’s foreign acquisitions were subject to the capital controls put in place last year. That follows an incident last month in which shares of Wanda’s publicly-traded film company plunged nearly 10 percent after rumors appeared on Chinese social media that Chinese banks had been ordered to sell the company’s bonds. The company denied that “vicious” speculation.
Legendary, whose former chairman and CEO Thomas Tull left the company in January, said that its operations wouldn’t be affected by any financing pullback tied to Wanda.
“Legendary is well capitalized with liquidity to fund its film and TV slates and operate its business as usual,” the production company said in a Tuesday statement. “Furthermore, Legendary has not been presented with any Chinese bank documents referenced by the recent press reports surrounding its parent, Wanda, and has not experienced any change in its relationship with Wanda.”
Last week, Wanda announced that it would be selling its theme parks and 76 hotels to fellow Chinese conglomerate Sunac Holdings in a $9.3 billion deal. One day later, the company took its film production business, Wanda Media, public as part of a merger with its local cinema company. And on Tuesday, Wanda signed its theme parks and hotels deal — with a new, never-before-mentioned buyer of those 76 hotels, plus the Wanda Realm Beijing, R&F Properties. Sunac remained the buyer of the theme parks, acquiring a 91 percent stake in 13 “cultural tourism projects,” although Wanda will continue to manage them.
An individual with knowledge of the circumstances said the theme park and hotel sale was driven by Wanda’s “unsustainable” debt to earnings ratio, which came as a result of its buying spree. And rather than lose face by having one of the country’s highest profile companies go belly-up, Chinese authorities decided to lean on Wang to offload those assets for cash in order to tighten up its books, particularly as Shanghai Disneyland Park has emerged as a formidable competitor to its theme parks.
The company acknowledged as much in a statement posted Wednesday on its website, which said “Wanda can significantly decrease the liabilities and recover tremendous cash flow via this transfer,” and touted its new “asset-light” strategy. That’s a significant change of course for a company whose prodigious bankroll and brash leader kept it at the tip of Tinseltown’s tongues when speculating about buyers for studios and production companies, including Paramount Pictures last year. But as regulators show no sign of loosening their grip on Wanda, Wang’s empire could continue to shrink. Hollywood will certainly be watching.