Wang Jianlin
Wang Jianlin, China’s second-richest man, has made no secret of his ambition to dominate Hollywood. But suddenly the billionaire chairman of Dalian Wanda Group Co. has run headlong into an unexpected obstacle: Beijing.
The Chinese government plans to cut off funding and regulatory approvals to punish Wang’s firm for breaching restrictions on six overseas investments, four of them completed, according to people familiar with the matter.
Wanda is among conglomerates, including Fosun International Ltd., HNA Group Co. and Anbang Insurance Group Co., whose loans are under government scrutiny, according to people familiar with the matter. China’s banking regulator asked some lenders to provide information on overseas loans to the companies, the people said in June.
From its roots as a property-development company, Wanda has blossomed into a big-shot Hollywood producer, the world’s biggest operator of movie theaters and a player in the sports- marketing world. The company announced more than USD20 billion of deals since the start of 2016 and predicts that sales will climb to $100 billion by the end of the decade from less than $40 billion last year.
All that’s now in jeopardy as Wanda faces sanctions. If banks respond to the government decree by squeezing credit lines and restricting debt rollovers, Wanda may have no choice but to sell off pieces of Wang’s empire.
“That will be the only way if they cannot get further financing from the banking system or the market,” said Castor Pang, head of research at Core-Pacific Yamaichi HK. Becoming a seller would be a reversal for Wanda, which has been among China’s most voracious buyers of foreign assets.
In early 2016, Wanda paid $3.5 billion for Legendary Entertainment, producer of “Kong: Skull Island” and “Straight Outta Compton,” among other top Hollywood movies. Wanda operates movie chains including AMC Entertainment Holdings Inc., which it bought in 2012. News of Wanda’s setback led AMC to tumble by a record 10 percent in New York trading on Monday.
Wanda owns British yachtmaker Sunseeker International Ltd., sports marketer Infront Sports & Media AG and Ironman organizer World Triathlon Corp. It also has a stake in soccer squad Club Atletico de Madrid.
The punitive measures come at a time when Wanda is already shrinking from Wang’s ambitious attempts to take on Hollywood. “The Great Wall,” an action movie with a $150 million budget backed by Wanda and starring Matt Damon, was a flop at the U.S. box office earlier this year, around the same time a $1 billion deal to buy the producer of the Golden Globe Awards collapsed.
This month, Wanda gave up on Wang’s plan to build theme parks to rival Walt Disney’s new Shanghai Disneyland. Wanda agreed to sell 76 hotels and a 91 percent stake in 13 cultural and tourism projects to Sunac China Holdings Ltd. for 63.2 billion yuan ($9.3 billion).
“Wanda has been trying to deleverage and reduce its gearing ratio,” said Dickie Wong, executive director of research at Kingston Securities Ltd. in Hong Kong. “We might see Wanda sell overseas assets.”
Wang, 62, is worth $30.3 billion, making him the 25th wealthiest person in the world, according to the Bloomberg Billionaires Index. It’s ironic that after his ambitions were questioned by some in Hollywood, Beijing was what has slowed him down. Wang has said that in his business philosophy, purchases are essential to success.
“Acquisitions have always been a complicated but necessary part of a company seeking to expand globally, which is why relying solely on organic growth will only get you so far,” he said in a 2012 speech, according to his 2016 book “The Wanda Way.”
“You won’t find one Fortune 500 company who made it to where they are today without acquiring businesses,” he said.
While the sale to Sunac will help Wanda slim down, it also contributes to uncertainty about the firm’s direction, according to S&P Global Ratings, which on Monday announced it had placed the group’s Dalian Wanda Commercial Properties Co. on credit watch with negative implications.
“We expect Wanda Commercial’s property sales to decline significantly following the sale of its tourism projects,” S&P Global Ratings said in a statement. “We expect Wanda Commercial’s property sales to decline significantly following the sale of its tourism projects.” A Wanda representative declined to comment.
Government sanctions could further complicate Wang’s effort to list Dalian Wanda Commercial property following last year’s record $4.4 billion privatization. Wanda de-listed the property unit from the Hong Kong exchange last year to pursue an initial public offering in the mainland. The firm promised its partners they’d would get back more than $5 billion – the money they put in plus returns of as much as 12 percent a year – if the listing didn’t occur in time.
Wang, however, said in “The Wanda Way” that he possesses the spirit to fight until the end.
“I’ve always said that ambition never dies until there is no way out,” he said. “Why? Because solutions are always there for the problems we face.” Bruce Einhorn, Prudence Ho, Bloomberg
