$1 Bil Dick Clark Deal is Wanda’s Latest Cross-Border MegaFlop

Billionaire Wang Jianlin’s dream of becoming a Hollywood mogul slipped just a bit further beyond the horizon last week when the owner of TV studio Dick Clark Productions filed suit against Wang’s Dalian Wanda Group for failure to honor the terms of a $1.07 billion purchase agreement.

Wanda had agreed to buy the producer of the Golden Globes and the American Music Awards in October last year with a scheduled closing date of January 17^th, according to a court filing last week by Eldridge Industries. Wanda, which has been one of China’s most aggressive buyers of overseas assets, failed to meet that deadline as the country’s financial authorities clamp down on cash outflows in reaction to continued pressure on the Chinese yuan.

For Wang, who first caught Hollywood’s eye by purchasing the AMC movie theatre chain for $2.6 billion in 2012, the Dick Clark failure is the latest in a series of setbacks for the one-time PLA officer who has taken on a dizzying array of entertainment and property deals outside of his home market in the last five years.

US Studio Owner Sues for Escrow Funds

“Eldridge Industries announced today that one of its affiliates has terminated its agreement to sell Dick Clark Productions to the Dalian Wanda Group,” Eldridge was quoted as saying in Variety. The owner of the TV production studio went on to say that it has sued in US court for the release of escrow funds amounting to $25 million due to Wanda failing to meet its obligations under the purchase agreement.

Wanda had already made an initial $25 million payment for Dick Clark Productions, but Wang’s firm, which owns China’s largest theatre chain, in addition to AMC and US film production studio Legendary Entertainment, has yet to comment on its difficulties with the Dick Clark transaction. Eldridge indicated that it had extended the initial January deadline to the end of February, before filing in court last week.

An Old Soldier Falls Out of Step

While Wanda has suffered setbacks with deals in Spain, the UK and the US for a variety of reasons, many analysts surmise that Wang’s agreement to buy Dick Clark Productions may have run afoul of China’s new push to reduce currency outflows and rein in questionable transactions.

In December, China’s top planning body, the National Development and Reform Commission (NDRC) announced that they were monitoring “irrational” overseas deals – including those in the entertainment sector. Wang’s agreement with Eldridge was greeted by surprise when it was announced last year, as many US players had valued Dick Clark Productions at hundreds of millions of dollars less than Wanda’s offer.

Wanda, which is known for its close ties to senior officials has not come in line for direct criticism, but Wang’s deal making style appears to be out of step with the current mood in Beijing, “Some people [invested offshore] blindly and were in a rush to do so,” China’s central bank governor Zhou Xiaochuan said at the party’s annual legislative gathering on Friday, according to the Financial Times. “Some of this outbound investment was not in line with our own policies and had no real gain for China.”

Lighting a Path with Overpriced Deals

While the $50 million which Wanda is in line to lose on the Dick Clark deal is a fraction of the cost of one of the more than 100 malls the company has opened in China, the setback raises questions about Wanda’s cross-border deal-making progress.

Wang grabbed his biggest headlines last year with what Wanda has quantified as a $3.5 billion acquisition of Legendary Entertainment. While that deal gave the real estate developer a bigger place in the Hollywood scene at a price which has never been independently verified, Legendary was losing money at the time and has gotten worse since.

Legendary put up 25 percent of the budget for the $150 million Matt Damon movie, The Great Wall, only to see the joint US-Chinese production lose $75 million at the box office. Faced with the scifi film’s poor performance, Legendary CEO Thomas Tull left the company in January, and Wanda is still searching for a permanent replacement.

Chinese Real Estate Expertise Fails to Translate Globally

And Wanda’s acquisition stumbles have not been limited to its entertainment deals. The company, which saw revenues drop 14 percent in 2016 despite its acquisition streak, has also struggled in its core business of real estate development.

In December Wanda revealed to the Hong Kong stock exchange that it had sold off the Edificio Espana at a loss equivalent to $75 million, after abandoning plans to tear down and rebuild the historically protected Madrid landmark. In London, Wanda is now on its third contractor for the $1.1 billion One Nine Elms project, after the first two builders hired reportedly walked away from the residential development deal.

Problems also surfaced in December with Wanda’s $4.4 billion plan to privatise and then re-list its commercial development wing on a mainland exchange, when the project’s primary director resigned.

Lu Xiaoma quit the company after would-be back-door-listing partner, Beijing Soft Rock Investment Group, backed away from the deal. Dalian Wanda Commercial Properties de-listed from the Hong Kong exchange in September, and although Wang guaranteed investors a mainland listing within two years, Wanda has yet to announce a new partner for the reverse-merger scheme.