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Wanda Says Thomas Tull Exit Reflects Restructuring, Not Flops

Legendary Entertainment’s Chinese owner, Dalian Wanda, said Friday that the abrupt exit of founder Thomas Tull is part of its larger restructuring plans but that the change at the top did not reflect dissatisfaction with Tull or the recent release of “The Great Wall,” which some have described as disappointing.

“Legend’s personnel adjustments are due to Wanda Pictures’ overall structure” and are part of Wanda Chairman Wang Jianlin’s previously announced expansion plans, a brief statement from the Chinese conglomerate said.

“‘The Great Wall’ has just begun its worldwide release, and it has not yet been released in the North American region,” the statement added. “Its so-called failure is a fiction.”

The Zhang Yimou-directed action film, which reportedly cost $150 million to make, has generated slightly more than $200 million at the box office, most of that in China, since its December release. How it performs in the U.S. after it hits theaters there next month will be closely watched.

Tull announced his resignation as CEO on Tuesday in the U.S., with Jack Gao, senior VP of Wanda’s Cultural Industries group, taking over as interim leader. Sources say that Wanda has held preliminary talks with Jim Gianopulos, former co-chairman of Fox films, as a possible replacement.

Wanda had remained silent on Tull’s departure but on Friday issued a three-paragraph statement in Chinese to Variety. Its terse explanation of Tull’s exit did not explain why he did not fit into the company’s vision or its restructuring plan. The statement said Wanda would “release big news concerning the film industry soon.”

Wanda bought Legendary in early 2016 for up to $3.5 billion, a price tag that baffled many in the industry. Concerns that it had overpaid appeared to be confirmed when a regulatory filing showed that Legendary lost hundreds of millions of dollars in 2015.

In his annual work report a week ago, Wanda chairman Wang noted his company’s ambition to control 20% of the global cinema market, which he believes would give it ample bargaining power when negotiating with the six major Hollywood studios. Speaking this week in Davos at the World Economic Forum, Wang said that Wanda is planning $5 billion to $10 billion of overseas deals this year, with the major focus on entertainment and sports.

Wang has made no secret of his desire to buy a Hollywood studio. But recently he said talks were not making progress, for lack of willing sellers.

Legendary’s performance over the past couple of years has been mixed. In 2016, its two film releases in China both scored big box-office numbers. “Warcraft” was at its most successful in China with $221 million, compared with $47.3 million in North America.

Since its December release, “The Great Wall” has earned close to $166 million (RMB1.14 billion), making it one of the biggest films of 2016 in the Middle Kingdom. But that figure was below some projections, though the overall slowdown at the Chinese box office last year makes comparisons tricky.

With its big production budget, “The Great Wall” still needs to score well in other territories. To date, it has grossed more than $40 million in ongoing theatrical release in Asia and Europe. Its North American outing, handled by co-financier Universal Pictures, is set for Feb. 17.

Wanda previously attempted a restructuring of its film businesses in the months shortly after the Legendary acquisition. That corporate reshuffle was to have seen some 20 outside companies provide investment for Wanda Pictures. However, the deals were halted by regulators, who expressed concern over the financial viability of the maneuvers.

That is a pattern that has played out previously. Two years earlier, regulators halted the IPO of film exhibition unit Wanda Cinema Line, only for Wanda to present new accounts and list the company on the Shenzhen stock exchange in January 2015.

Despite a dramatic retreat in the value of Chinese stocks in 2016, Wanda Cinema Line is valued at $6.8 billion (RMB46.9 billion) compared with the $3.45-billion market capitalization of AMC Entertainment, the U.S. theatrical market leader which Wanda also controls.

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