Six of Wanda’s acquisitions under scrutiny
July 24, 2017 Category Mergers & Acquisitions, Weekly
The China Banking Regulatory Commission (CBRC) has instructed the country’s largest banks to put six of Wanda Chairman Wang Jianlin’s overseas acquisitions under scrutiny for possible breaches of foreign investment rules. Banks are to cut off funding and reject any applications for financing, foreign currency exchange, or restructuring for the six acquisitions. Some of the acquisitions were made by Wanda’s AMC Entertainment Holdings unit, which the Chinese company bought in 2012. They include the USD930 million acquisition of the Nordic Cinema Group, and the USD1.1 billion purchase of Carmike Cinemas, the fourth-largest American cinema operator. They also cover Wang’s acquisition of the yacht maker Sunseeker International, the Hollywood studio Legendary Entertainment, AMC itself, and Odean & UCI Cinemas Group. The acquisitions are forbidden from being injected into any of Wanda’s China-listed companies, and Wanda is barred from injecting any funds, or conducting any form of financial restructuring involving these assets, if they encounter operational difficulties. The unprecedented instructions would close off any available avenue of financing for the highly leveraged Wanda, which may have contributed to Wang’s decision to sell the majority of his hotel and theme park holdings – including a Harbin park that opened barely two weeks earlier — to Shanxi magnate Sun Hongbin for USD9.3 billion, in what would turn out to be the largest single real estate sale in China’s corporate history. “Wanda is in a lot of trouble,” said Shaun Rein, Founder of the China Market Research Group. “It remains to be seen how much of their growth was built on real asset development with cash flow and how much purely on borrowing money,” he added. A Wanda Group Spokesman in Beijing declined to comment, the South China Morning Post reports. The Anbang Group, Fosun Group, HNA Group and Rossoneri Sport Investment have also been singled out for scrutiny.
Wanda Group will sell 77 hotels for CNY19.9 billion to Guangzhou R&F Properties, one of the biggest developers in Guangdong province. Sunac China, which originally agreed to buy the properties, will still pay CNY43.8 billion to buy 13 tourism-related projects including theme parks from Wanda, scaling back a CNY63.7 billion acquisition announced days earlier. “It is a win-win-win for all our three parties and will largely reduce Wanda’s debt,” Chairman Wang Jianlin said at a hastily called press conference at the Sofitel Hotel in his flagship Wanda plaza in Beijing. “It’s also a big step forward in our asset-light transformation,” Wang said. An adjustment in the acquisition strategy “would release more liquidity for Sunac and help us reduce debt,” Sunac’s Founder and Chairman Sun Hongbin said, in explaining why his company dropped the plan to buy Wanda’s hotels.
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