China's property giant Dalian Wanda Group plans $12.8b sale of assets

A sign of Dalian Wanda Group is seen in China.
A sign of Dalian Wanda Group is seen in China.PHOTO: REUTERS

Property giant's deal expected to help it cut debt as it scales back theme park ambitions

HONG KONG • Dalian Wanda Group said it would sell Chinese tourism projects and hotels to Sunac China for a total of 63.18 billion yuan (S$12.8 billion), marking a step back for the property giant from its theme park ambitions.

The sale is, however, expected to help Wanda cut its debt pile and strengthen its case for a listing on the mainland after it delisted from Hong Kong last year.

Wanda said it would sell 91 per cent of 13 cultural tourism projects, which typically include theme parks and leisure complexes, as well as 76 hotels to the acquisitive Tianjin- based developer Sunac.

The Chinese group, with businesses spanning real estate, films, sports and entertainment, had plans to build at least 20 such cultural projects around China.

Its billionaire owner Wang Jianlin had said last year that his "wolf pack" of parks would beat American rival Walt Disney.

"This (deal) signifies a retreat from Wanda's previous strategy in cultural tourism, and marks a pivot to an asset-light strategy," said senior researcher Qin Gang of the State Information Centre, a government-linked think-tank.

While Wanda did not give a reason for the sale, local business magazine Caixin quoted Mr Wang as saying that the deal would greatly reduce Wanda Commercial's debt level and help the property unit to achieve an "asset-light" operation.

  • Rise of an empire

    Wanda Group is headed by one of the country's richest men, Mr Wang Jianlin, who has a net worth of US$30.4 billion (S$42 billion), according to Forbes.

    The billionaire owner spent his youth in the military and dabbled in local politics before venturing into business. He made his initial fortune in real estate.

    His Dalian Wanda Commercial Property is the country's largest commercial real estate developer, with its shopping complexes very popular around the country. The Wanda Group has other businesses, such as financial services.

    The company posted revenue growth of 17.9 per cent in the first half of this year to 134.8 billion yuan (S$27.5 billion).

    In recent years, Mr Wang has pursued the expansion of his empire, from real estate to entertainment, tourism and sports facilities. Wanda's overseas push included the acquisition of firms like US-based cinema chain AMC Theatres, Hollywood studio Legendary Entertainment and Spanish soccer team Atletico Madrid. After Disneyland opened its first theme park in China last year, Mr Wang announced plans to build 20 theme parks with Chinese characters by 2020, of which 15 would be in China and five abroad.

    Wanda's expansion was aided by Beijing's encouragement of firms to invest overseas to find new markets, access technology and increase China Inc's influence. But the rule was reversed recently as concerns grew over capital flight.

    Wanda was among the more acquisitive players in a flood of Chinese money overseas that raised concerns in Beijing over "irrational" investments. The firm admitted last month that China's banking regulator was looking into potentially risky loans it held.

    SOURCES: REUTERS, AGENCE FRANCE-PRESSE,

"Through this asset transfer, Wanda Commercial's debt ratio will be greatly reduced, and all the proceeds will be used to repay loans. Wanda Commercial plans to repay most of the bank loans this year," Mr Wang told Caixin.

S&P downgraded Wanda Commercial in December last year, citing rising financial leverage and slower-than-expected asset disposal at China's largest commercial developer. Another downgrade would push the rating into "junk" category.

Wanda has been investing heavily in entertainment, leisure and financial businesses, and the buying spree has drawn the attention of Chinese regulators, who ordered lenders last month to assess exposure to overseas deals by Wanda, HNA Group, Anbang Insurance and Fosun.

Wanda had earmarked an investment of more than 300 billion yuan for its cultural and tourism projects. It has also been very active globally, buying US cinema chain operator AMC Entertainment Holdings and taking a controlling stake in US film studio Legendary Entertainment last year.

Sunac and Wanda are expected to sign an agreement by the end of this month.

Shares in Wanda Hotel Development surged more than 150 per cent after the news.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 11, 2017, with the headline 'Wanda plans $12.8b sale of assets'. Print Edition | Subscribe