Crackdown thwarts Wanda's Hollywood ambitions

BEIJING • China plans to cut off some funding to billionaire Wang Jianlin's Dalian Wanda Group after concluding that the conglomerate breached restrictions for overseas investments, said people familiar with the decision.

The scrutiny could rein in Mr Wang's ambitious attempt to create a global entertainment empire, including Hollywood production companies and a giant cinema chain he has built up through acquisitions from the United States to Britain.

Six investments, such as the purchases of Nordic Cinema Group and Carmike Cinemas, were found to have violations, said the sources, who asked not to be identified. The retaliatory measures will include banning banks from providing Wanda with financial support linked to these projects and barring the company from selling those assets to any local companies, the people said.

The move is an unprecedented setback for the country's second- richest man, who has announced more than US$20 billion (S$27.3 billion) worth of deals since the beginning of last year.

By targeting one of the nation's top businessmen, the government is escalating its broader crackdown on capital outflows and further chilling the prospects of overseas acquisitions during a politically sensitive year in China.

"To investors, political risk is now the biggest concern when investing in Chinese companies," said Mr Castor Pang, head of research at Core- Pacific Yamaichi HK. "Not only Wanda, every Chinese company won't find it easy anymore to acquire assets overseas. Stabilising the yuan is the top priority for Beijing now."

A Wanda representative declined to comment. China's banking regulator did not respond to requests for comment and it was not immediately clear which investment rules Wanda breached.

Wanda Properties International's 2024 notes declined by as much as 6.3 US cents on the US dollar to 98.7 US cents in Hong Kong trading on Monday, according to Bloomberg-compiled data. Wanda Hotel Development shares fell by as much as 7.3 per cent.

AMC Entertainment, the Wang- controlled US cinema chain that acquired Nordic, Carmike and Odeon & UCI Cinemas Holdings over the past year, fell as much as 8.7 per cent to US$20 in New York trading.

Four of the six deals under scrutiny have been completed, according to the sources. Besides the bank-financing ban, Wanda will be prohibited from selling those acquired assets to any listed entity in China, infusing capital into those assets from within China or involving them in any restructuring with any of Wanda's domestic units, the people said.

On the two pending deals, the related authorities will not provide support in financing or foreign exchange-related approvals needed to move money out of China, according to the sources.

Wanda is among conglomerates including Fosun International, HNA Group and Anbang Insurance Group whose loans are under government scrutiny after China's banking regulator asked some lenders to provide information on overseas loans to the companies, people familiar with the matter said last month.

Though cutting off funding may pressure Wanda, the group is poised to get some relief after it agreed to sell hotels, land and projects to Chinese developer Sunac China Holdings Ltd in a 63.2 billion yuan (S$12.8 billion) deal announced last week.

For Mr Wang, the sale of the bulk of his Wanda City projects - multibillion-dollar complexes with theme parks and lodgings - represented a departure from his past predictions that he would build a tourism empire bigger than that of Walt Disney Co.

The increased scrutiny on overseas deals led Wanda to scrap its US$1 billion offer to buy Dick Clark Productions, the Hollywood producer behind the Golden Globe Awards.

The setback also comes ahead of one of Wanda's biggest planned deals: the relisting of Dalian Wanda Commercial Properties in China. Mr Wang privatised the firm in a record US$4.4 billion deal to relocate the developer's listing to the mainland at higher valuations.

Wanda had promised its partners would get back more than US$5 billion - the money they put in plus returns of up to 12 per cent a year - if the listing did not occur by next year. Mr Wang is also planning to inject film-related assets into Shenzhen-listed Wanda Film Holding .

It is also happening ahead of a party congress that analysts say will set the tone for Mr Xi Jinping's second five-year term as President.

Wanda has been among China's most active acquirers of foreign assets in recent years, gobbling up companies such as Kong: Skull Island producer Legendary Entertainment, AMC Entertainment and Sunseeker International. The group, which traces its roots to property, has been expanding in entertainment as its key area for growth.

Besides being the world's biggest operator of movie theatres, Wanda has branched out to sports by buying marketer Infront Sports & Media and Ironman organiser World Triathlon. It also owns a stake in Club Atletico de Madrid and the group is a top Fifa sponsor.

Behind Mr Wang's purchases are ambitions to make Wanda one of the world's biggest companies. The group, which had operating revenue of less than US$40 billion last year, has forecast its sales will climb to US$100 billion by the end of the decade, generate profits of US$10 billion and have a market value of US$200 billion.

The Wall Street Journal earlier reported that China is restricting the completion of six overseas deals by Wanda Group following the government's broader crackdown on offshore investments.

A version of this article appeared in the print edition of The Straits Times on July 19, 2017, with the headline 'Crackdown thwarts Wanda's Hollywood ambitions'. Print Edition | Subscribe