Wanda’s Wang Jianlin Selling Film Unit to Tencent-Backed China Ruyi

Wang Jianlin, the billionaire chairman of troubled Chinese developer Dalian Wanda Group, is set to sell his controlling stake in the company’s film business, with the once would-be media mogul shedding his movie holdings amid a liquidity crunch.

In a filing to the Shenzhen Stock Exchange on Wednesday, Wanda Group’s cinema operation and film production unit, Wanda Film, announced that Wang and two entities controlled by the the PLA soldier-turned tycoon plan to transfer their combined 51 percent stake in Beijing Wanda Investment, Wanda Film’s controlling entity, to a subsidiary of China Ruyi Holdings.

The planned purchase by China Ruyi gives the Tencent-backed media and entertainment company control of Wanda Film after it acquired 49 percent of Beijing Wanda Investment from Wanda Group for RMB 2.26 billion ($320 million) in July.

Beijing Wanda Investment is Wanda Film’s largest shareholder with a 20 percent stake as of September 2023. Wang remains Wanda Film’s second-biggest shareholder with his Shenxian Rongzhi Xingye Management Consulting Center vehicle holding a 10.2 percent stake.

Shenzhen-listed Wanda Film did not disclose terms of the transaction, with the firm noting in the filing that, “If the above matters are ultimately implemented, it will result in a change of control of the company”.

Near Default

Hong Kong-listed China Ruyi, which acquired the stake through its Shanghai Ruyi Investment Management subsidiary, is a domestic online entertainment and content producer formed in 2015 as a joint venture between defaulted developer China Evergrande and Tencent, with Evergrande later exiting in a series of stake sales.

In the same month that China Ruyi made its initial purchase, Beijing Wanda Investment also sold a 8.26 percent stake in Wanda Film to Lu Lili, the wife of financial data provider East Money Information owner Qi Shi, for RMB 2.2 billion ($307 million), making her Wanda Film’s third largest shareholder.

Wang’s sale of his film business, which is China’s largest cinema operator with 877 theatres and 7,338 screens as of September, comes as his company grapples with a deepening property downturn in China that has seen Wanda Group and its mainland developer peers facing mounting funding pressures and defaulting on offshore borrowings.

Last week, Wanda won some breathing room as bondholders agreed to an 11-month extension on a $600 million offshore bond which had been due January 2024.

That extension was not enough to save the company’s credit rating, however, with ratings agency Fitch downgrading the long term foreign currency issuer default rating of Dalian Wanda Commercial Management Group (Wanda Commercial), Wanda Group’s main operating unit, to C for the second time following Wanda’s extension request announcement. Wanda Commercial’s offshore financing subsidiary Wanda Commercial Properties (Hong Kong) was also downgraded to C.

In August, Wanda narrowly averted default after using the proceeds from China Ruyi’s July purchase to pay a coupon on its $400 million offshore bond within the 10-day grace period, leading Fitch to raise its rating to CC. The delayed interest payment had previously triggered a downgrade of the company’s long-term foreign currency issuer default rating to C.

Wings Clipped

Once China’s richest man, Wang has suffered a reversal of fortune starting with Wang’s decision to delist his mall empire from the Hong Kong exchange in 2016 in pursuit of what was expected to be a more lucrative listing on a mainland bourse.

Borrowing from investors to finance the $4.4 billion buyout, Wang promised his backers a quick re-listing on the mainland, which never happened.

Following the privatisation, Wanda liquidated its assets worldwide after mainland authorities cracked down on Chinese conglomerates’ outbound capital flows following their high-profile global acquisition sprees in the preceding years.

Wang built his film empire through acquisitions of cinema chains AMC and Carmike in the US, Hoyts in Australia, and Odeon & UCI in the UK, making Wanda at one point the world’s largest operator of cinemas. Along the way, Wanda also bought Hollywood film studio Legendary Pictures.

However, the Chinese government’s 2017 block on bank lending for Wanda’s overseas acquisitions choked off funding to the deeply indebted developer, setting the company on a decline that has been compounded by the pandemic and China’s subsequent property slump.

Wang’s net worth has fallen to an estimated $6.3 billion this year from a peak of $46 billion in 2015, according to Bloomberg’s billionaire index.