PROSPEROUS CINEMA OPERATOR: Movie-goers buy tickets at a crowded Wanda Cinema in Wuhan, central China's Hubei Province (CFP)
Dalian Wanda Group Corp. Ltd., a private Chinese firm based in Dalian, northeast China's Liaoning Province, announced in May that it will purchase U.S. movie theater chain AMC Entertainment Holdings Inc., the second largest chain in North America. The deal is worth $2.6 billion, the largest acquisition for a movie theater franchise. Under the terms of the deal, Wanda must also assume AMC's debt. The group also promised to invest up to $500 million in AMC to pay for its strategic and operating initiatives in the future after the acquisition.
The deal, the largest overseas cultural investment from a domestic private enterprise, needs approval from the Chinese and U.S. governments before being formally closed. Wanda promised to secure employment of AMC's management team after the acquisition.
Wanda Group, China's leading commercial real estate developer, operates a variety of businesses including commercial properties, luxury hotels, tourism investment and department stores. Wanda Cinema Line, Asia's largest movie theater chain, owns 86 cineplexes and 730 screens, of which 47 are IMAX screens, and plans to increase its chain to more than 200 cineplexes with 2,000 screens by 2015.
Wanda Cinema Line generated 1.79 billion yuan ($282.64 million) in box office revenue in 2011, ranking first domestically, according to the State Administration of Radio, Film and Television.
Wanda will pay up to $3.1 billion for its AMC acquisition. Despite Wanda's blueprint in the international market, worries from experts and industry insiders abound whether Wanda can turn the heavily indebted AMC into a profit maker, and whether Wanda's practices in China can still apply in the foreign land.
A real deal
The purchase would turn Wanda into a truly global cinema owner, according to Wang Jianlin, Chairman of Dalian Wanda Group, who was ranked as China's sixth richest person last year, having a personal fortune of $7.1 billion, according to the independently run Hurun Report.
Although Wanda earned its initial fortune developing real estate, Wang's ambitions reach far beyond the property sector.
"We are determined to become a firstclass multinational company within 10 years. The proportion of commercial real estate should be lowered to less than 50 percent in Wanda by 2020," said Wang.
Purchasing AMC is Wanda's first step in our internationalization strategy. Wanda is also looking for other major cinema chains to acquire. It will continue to seek opportunities for overseas investments and mergers and acquisitions, especially in the cultural industry, in an effort to reach the goal of taking up 20 percent of the global film market by 2020, said Wang.
Wanda's decision to pursue the acquisition is aimed at transforming its development pattern by expanding its cultural industry worldwide.
Over the past three years, Wanda Group has invested in the cultural industry and tourism resorts. Wanda's investment in the cultural industry has reached over 10 billion yuan ($1.58 billion), becoming a key investment area for the group.