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Wanda Poised to Spend $30 Billion in Year of Deals

When Wang Jianlin, chairman of China’s Dalian Wanda group, sat down in January at the Wanda-owned Sofitel Hotel in Beijing, he boldly told a select group of journalists that the $3.5 billion takeover of Legendary Pictures would only be the first of many deals this year. He predicted five major acquisitions to come, with three of them abroad.

By the end of March, Wang had seemingly had fulfilled his promise and committed Wanda to some $25 billion of spending, becoming one of the world’s top deal-makers in the process.

If Wanda were also to go ahead with the purchase of a 49% stake in Paramount Pictures, he would indelibly write Wanda’s name in the Hollywood history books, as the first Chinese to own such a substantial piece of an MPA studio.

Wanda’s deals to date now exceed $28 billion. If the Paramount deal were to go ahead, with a price tag of $4-5 billion, Wang’s spending this year would top $30 billion – even if the $1.1 billion Carmike acquisition by AMC fails to be completed.

Though Wanda’s biggest deal of the year is a $10 billion commitment to building an industrial park in Haryana in Northern India, nearly half of the total would be in the entertainment and sports sectors.

Wanda Cinema Line’s proposed buyout of Wanda Media is the second biggest component with a reported price tag of $5.7 billion. That deal was announced in May as the culmination of several months of fund raising and restructuring that left shares in the movie theaters subsidiary suspended from trading since February. It appears to see Legendary, along with Wanda’s other film production and distribution properties, all swept up into the single WCL listed vehicle instead of being given separate IPOs. After all the maneuvers, regulators asked for more information on the deal, leaving the completion date unclear.

Wanda is also proposing to pay $4 billion to buy up the minority shares in Hong Kong-listed Wanda Commercial Properties that the parent company does not own. This is a by now classic case of a Chinese corporation becoming frustrated with lower investment ratings and share prices than it could obtain on the rollercoaster Chinese stock markets. The play is to delist in Hong Kong and presumably relist in Shanghai or Shenzhen.

The company’s commitment to a $3.4 billion property development in Northern Paris, announced in March, is classic Wanda territory as it straddles both retail and entertainment.

Other deals announced in the second quarter are also extensions or expansions of the group’s earlier diversification initiatives.

Earlier this week AMC announced that it is to pay $1.21 billion (GBP924 million) for Odeon/UCI, Europe’s largest cinema chain, with a footprint that covers the U.K. and Ireland, Germany, Italy and Spain. With private equity firm Terra Firma keen to exit and the British pound weaker after the ‘Brexit’ vote, the deal will be far from the largest this year for Wanda which is understood to have previously shied away from the price tag.

This week too Wanda announced that it had the approval of the world soccer governing body FIFA to launch a major international competition, the “China Cup’ International Football Tournament” that will kick off in January 2017 in Nanning, a town where Wanda recently opened a major theme park. This follows its 2014 acquisition of Infront Sports, a marketing company that handles broadcast rights for FIFA, and a deal in March with FIFA that makes Wanda a top level sponsor for the next four football World Cups. The cost of the FIFA deal is believed to be well into the hundreds of millions of dollars.

As befits a firm with its roots in property development, Wanda has been able to take strategic, long term views on markets and sectors. These saw it develop in property, retail malls and hotels initially. Latterly it expanded into entertainment, sports, tourism (including theme parks) and e-commerce, under a new ‘asset light’ policy.

Wanda did not have everything its own way in the quarter – and at least a couple of deals got away. The company is known to have been a bidder for Mars, the largest cinema chain in Turkey. The deal went instead to Korea’s CJ-CGV for $800 million. And Wanda came out on the losing side in a bid for wrestling entertainment empire UFC. That deal was sealed instead by WME-IMG for $4 billion over the weekend.

But with a parent company that is still privately controlled and is largely unencumbered by outside shareholders and stock market regulators, Wanda has been able to move quickly when it suits. That also means more deals are a near certainty.

Wanda’s moves into entertainment emerged fairly naturally from developing a network of upmarket shopping malls around China. Attractive cinemas generated footfalls for the company’s retail developments and, rather than lease the multiplexes to other chains, Wanda chose to become an operator itself.

So, when, in May 2012, Wanda unveiled its $2.6 billion takeover of AMC, America’s number two cinema chain, it was already the largest private sector operator of cinemas in the world’s most populous country. The deal screamed for attention, to a company that few entertainment executives outside China had ever heard of – yet further vertical integration was already being planned.

Wanda could claim no such anonymity a year later when it broke ground on its leisure, film studio and yachting complex in the coastal city of Qingdao. Major stars including Leonardo DiCaprio and Nicole Kidman were in attendance. And Hollywood and Wall Street have been tuned in ever since.

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