Wanda Sells Tourism Management Business to Sunac for RMB 6.28B

Dalian Wanda Group ended weeks of speculation on Monday by confirming that it has sold its tourism management business to Hong Kong-listed Sunac China Holding for RMB 6.28 billion ($902 million).

The sale follows tycoon Wang Jianlin’s RMB 43.8 billion sale last year to Sunac of Wanda’s 13 “Cultural Tourism City” theme park projects and cuts yet another arm off of a one-time property developer which Wang had tried to build into a world leading conglomerate involved in tourism, hotels and entertainment.

Over the past year Wanda has divested itself of all of its overseas real estate investments, following a crackdown on outbound investment deals and excessive leverage by China’s central government.

Wanda Unloads Tourism Business

Struggling with debts after it had been targetted by the central government as over-leveraged, in July last year Wanda initially announced that it was selling a 91 percent stake in its 13 theme park-based development projects, along with 76 hotels, to the Tianjin-builder for RMB 63.18 billion ($9.3 billion).

That deal was revised just one week later when Guangzhou’s R&F Properties suddenly stepping in to acquire 77 hotels, including the 76 said to be sold to Sunac, from Dalian Wanda Group for RMB 19.9 billion ($2.9 billion).

Sunac followed through with its agreement during the same month to purchase the 13 entertainment-based projects, which include both full-scale theme parks, and commercial or residential developments built around themed attractions for RMB 43.8 billion. That deal included a contract for Sunac to pay Wanda an annual management consulting fee of RMB 50 million to manage the 13 properties for the next 20 years.

Management Deal Proves Hard to Manage

Wanda said in Monday’s announcement posted on its corporate website that in the actual execution of the agreement, it had encountered  “numerous inconveniences.” “The projects will benefit considerably more if their planning, construction, operation and management come from the same investor,” it said.

After the two parties’ “friendly negotiations”, it agreed to sell its tourism units to Sunac China. Wanda promised in the statement that it “will utilize all its resources to give Sunac its full support for the smooth opening and operation of those already acquired and yet-to-be completed projects.”

A separate filing by Sunac to the Hong Kong Stock Exchange said for the purpose of “improving the projects’ management efficiency,” it agreed to acquire a 75 percent equity interest in Chengdu Wanda Theme Cultural and Tourism Management Co. Ltd for RMB 4.95 billion, along with 99 percent of Wanda Culture Travel Innovation Group and a one percent stake in Wanda BVI for RMB 1.5 billion.

As part of the same deal, Wanda also agreed to terminate the original commercial arrangement with Sunac for a consideration of approximately RMB 287 million. Upon completion of the transaction, Sunac will hold 100 percent of Wanda Cultural Management.

Monday’s statement came after Wanda has posted a statement on its website on October 17th, denying that any deal was impending for the troubled Dalian developer was ready to sell its tourism management business.

Sunac and Wanda Head in Opposite Directions

Sunac’s acquisition of Wanda’s tourism management business, along with its pick up of the 13 developments last year, has effectively made Sunac a leading player in China’s theme park industry, a rapidly growing segment inspired by growing consumer spending and the success of Shanghai Disney.

Led by its high-profile chairman Sun Hongbin, Sunac established a cultural tourism subsidiary in China’s tropical island of Hainan this August.

Sunac, which appears undeterred by having one of the highest levels of leverage in China’s real estate sector, has been acquiring assets, almost as quickly as Wanda has been selling them.

In September, Dalian Wanda handed over a stake in AMC Entertainment to private equity firm Silver Lake for $600 million, trimming off another slice of its billionaire chairman Wang Jianlin’s fading empire. During that same month, the Chinese developer disposed of its Los Angeles and Chicago projects, the last two assets in what once was a $5 billion overseas real estate portfolio.

Last Friday Wanda denied reports that it is offering for sale a stake in Hollywood production studio Legendary Entertainment, a loss-making movie producers which is purchased for a reported $3.5 billion in 2016. The company is also said to be offering for sale its investments in sports teams and marketing enterprises including the Ironman triathalon and other sports businesses.