Chinese companies splash the cash abroad
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Chinese companies splash the cash abroad
China film - Yahoo!
CLIFFORD COONAN
Ties between the US and Chinese film industries have been getting cosy since China agreed in February to open its market to more overseas films
LAST WEEK was busy for Chinese companies in which we got a sense of the impact that an emerging China is going to have on the corporate world. Property giant Wanda spent €2 billion to buy the US film theatre chain AMC Entertainment, making it the world’s biggest cinema owner. The move for North America’s second-biggest chain of movie houses is the largest ever purchase of a US firm by a Chinese company.
While we have long known that Chinese companies are cash-rich, the purchase shows a strong level of ambition, a desire to buy an established brand to develop a business, rather than spend years trying to develop a new one.
“We made a goal to build Wanda into a top notch international company,” Wang Jianlin, chairman and president of Wanda, said at a high-profile launch ceremony in a hotel in Beijing. “This acquisition will help make Wanda a truly global cinema owner, with theatres and technology that enhance the movie-going experience for audiences in the world’s two largest movie markets.”
The acquisition includes about €1.6 billion in assumed debt. Depending on whom you believe, Wang is either China’s richest man or its sixth richest – the figures vary. Wanda is now reportedly looking for a European cinema operator to add to its armoury.
It also boosts the profile of Wanda even higher than it already is, which is pretty high in China. It is a private company, for one, in an area dominated by state-owned companies.
It is best known for building shopping malls, but this transforms the company into a serious player in the entertainment business.
AMC, based in Kansas City, Missouri, operates 346 multiplex theatres, mostly in major US and Canadian cities with a total of 5,034 screens. It is controlled by private- equity firms including Apollo Global Management, Carlyle Group, Bain Capital and Spectrum Equity Capital.
Last year AMC made a loss of $82.7 million (€65.4 million), but it is upbeat on the outlook for the company because of several big films hitting the screens and the way the year to date has been going.
Hollywood-China ties are getting warmer, Chinese firms are hungry for overseas assets, and the strong renminbi currency and still- expanding economy have given the Chinese the edge when it comes to shopping overseas.
The Wanda move to purchase AMC is significant because it could signal the start of a number of similar plays by Chinese companies for big Western firms. It is similar to what Japan did in the 1980s and 1990s before the economy there started to stagnate.
It is the latest in a series of high-profile purchases. Earlier this month we saw Bright Food, China’s second-biggest food company, succeed in buying a 60 per cent stake in the British breakfast cereal maker Weetabix from the private equity firm Lion Capital in a deal that values Weetabix at about €1.5 billion, including debt. A group led by a Chinese energy company has placed a bid for bankrupt Swedish car maker Saab.
In a separate deal which further highlights China’s growing power in the corporate sphere, Alibaba Group, China’s largest e-commerce provider, agreed to buy a stake of about 20 per cent in itself from US portal Yahoo for €5.56 billion. Yahoo acquired 40 per cent of Alibaba in 2005 in exchange for €780 million and ownership of the US company’s Chinese operations.
There have been relatively few high-profile deals so far, chief among them Lenovo’s purchase of the IBM ThinkPad brand and car maker Geely bought Volvo. Nanjing Auto also moved for MG’s car making plant.
The deal will involve no management changes, the HQ would remain in Kansas City and the transaction would have no impact on AMC’s employment levels or strategy.
Wanda, based in Dalian, northeast China, owns 86 cinema theatres in China, with 730 screens, while it also has interests in production and distribution. Annual revenues are €13 billion, while it controls €27.4 billion in assets. The deal was contingent on regulatory approval, but movie houses are not politically sensitive and it’s hard to see regulators standing in the way.
Ties between the US and Chinese film industries have been getting cosy since China agreed in February to open its market to more overseas films, increasing the quota of revenue-sharing foreign films from 20 per year to 34. Disney, DreamWorks Animation and News Corp have all announced co-production partnerships.
China’s biggest acquisition of a US company until now was Lenovo’s €1.4 billion takeover of IBM’s personal-computer business in 2005.
Wanda had been talking to AMC for several years, but negotiations stepped up a gear since the real estate boom in China forced a rise in the number of theatres in China and swelled Wanda’s cash for acquisitions. AMC also backed away from plans to go public, making way for takeover talks to continue.
After notching up over €1.56 billion last year, the Chinese box office is expected to exceed that of the US within the next three years and this year has seen major bonding between the US and China production companies.
Wanda is rarely out of the headlines in China as the government is trying to ease the real estate market amid bubble fears. Less prominent in the heavily censored domestic press have been his links to Bo Xilai, the purged former Communist Party chief of Chongqing who served as mayor in Dalian, Wanda’s home town. Bo’s wife has been arrested in connection with the murder of a British businessman.
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