China’s Richest Man Invites Shareholders to Help Pay Tuition

Wang Jianlin, whose Dalian Wanda Group has made some of China’s boldest overseas acquisitions, is now seeking $318 million of investment from his existing shareholders to help continue the company’s acquisitions of hotel companies, overseas real estate, yacht makers, and impressionist art.

According to an account filed on Sunday by Russell Flannery in Forbes,

“Wanda Commercial Properties (Group), a Hong Kong-listed real estate investment company controlled by China’s richest man Wang Jianlin, said today it plans to raise $318 million in a stock sale from existing shareholders.

Funds will be used for investments in China and overseas “when suitable opportunities become available,” as well as for general working capital.”

Wang Expecting a 50 Percent Failure Rate

Wang and Wanda have made headlines repeatedly this year for a series of high profile investments, and the Wanda Group has been among China’s most aggressive acquirers of overseas assets. Some observers see these acquisitions as high risk – even drawing comparisons to 1980s vintage misadventures by Japanese companies – and Wang does not entirely disagree.

When Dalian Wanda announced plans in June this year to launch its own global hotel chain, including billion dollar hotel projects in both London and New York which were both undertaken that month, Wang predicted, “Half of international acquisitions are going to fail, especially for China, which is just going international, but Chinese companies will become international companies sooner or later, so we have to take this step. Failures are our tuition.”

In addition to the hotel projects, Wanda paid more than US$500 million to purchase UK luxury yacht maker Sunseeker, and in November spent $28.2 million on a Picasso at auction at Christie’s in New York.

Wang is predicting that his firm will invest US$5 billion a year overseas over the coming years, and in 2012 had already purchased the AMC chain of movie theatres in the US, so what we’ve seen so far may be just the beginning.

Share Sale Follows Failed Bond Issue

While the share price of what is now Wanda Commercial Properties has climbed 10-fold since Wanda acquired it a year ago, there have been signs in the past few weeks that markets, and some regulatory authorities may be looking skeptically at some of the developer’s projects.

During November, Wanda was forced to postpone a plan to issue international bonds because of poor appetite from investors and market volatility, according to reports in the international press. Then it was learned earlier this month that local governments in Guangdong province had taken back three sites which had earlier been awarded to Wanda at auction earlier this year. A move which could have ramifications for the developer’s land bank in one of China’s wealthiest provinces.

After announcement of the share sale, the price of shares in Wanda Commercial Properties on the Hong Kong exchange dropped from a high of HK$3.51 per share on Friday to a low of HK$3.10 on Monday, before recovering to close the day at HK$3.42 per share.