Chinese conglomerate Dalian Wanda Group Co (大連萬達集團), which already owns the AMC chain of multiplex cinemas, is poised to buy a majority stake in a Hollywood production company that makes blockbuster-style movies, giving the politically powerful company with close ties to the Chinese Communist Party’s (CCP) ruling elite a foothold in the heart of the US entertainment industry.
Investors in the production company, Legendary Entertainment, have agreed to sell Wanda their stakes in a deal that values Legendary at about US$4 billion, according to people with knowledge of the matter, who spoke on condition of anonymity to discuss a transaction that was not yet public.
The investors cashing out of Legendary own a little more than 50 percent of the company, the people said.
The rest of Legendary would continue to be owned by its management, including Thomas Tull, a former laundromat owner who founded the production company in 2000 and turned it into a Hollywood powerhouse. Legendary’s hits include Godzilla and Pacific Rim. It has also been trying, with limited success, to develop a TV division.
Industry experts said the deal makes sense for both Wanda and Legendary, which tends to produce the type of big-budget, special-effects-driven movies that Chinese audiences like.
In addition to owning AMC, Wanda controls the biggest cinema chain in China, where box office receipts are set to eclipse the North American market in coming years. Wanda, a company owned by China’s richest man, Wang Jianlin (王健林), can provide Tull with money, a growing audience and a champion in China that can get more of his films into the tightly controlled market.
“Wanda represents a good source of funding for him,” merchant bank CastleHill Partners managing partner Peter Schloss said by telephone from Beijing. “Wanda likes the deal because it segues into the approach that they are using to build themselves into a multifaceted entertainment conglomerate.”
The deal deepens Wanda’s foray into the movie production business. Wanda made a splash in 2013 when it announced the construction of a US$8.2 billion studio in eastern China, flying in stars like Leonardo DiCaprio and Nicole Kidman for the occasion. Last year, Wanda helped produce Southpaw, a boxing movie starring Jake Gyllenhaal and Rachel McAdams, which was released by Weinstein Co. Wanda bought the AMC chain for US$2.6 billion in 2012, including US$2 billion in assumed debt.
Wanda’s investment also makes sense politically for its chairman, Wang, a former military officer who is carrying out the CCP’s goal of deepening Chinese influence in the global entertainment industry. As many of China’s most powerful families — including relatives of Chinese President Xi Jinping (習近平) — have bought shares in Wanda, the Legendary purchase furthers Wang’s importance to the country’s political elite at a time when some of the country’s richest businessmen are falling victim to Xi’s anticorruption campaign, now entering its fourth year.
“He’s basically putting himself in such an important position that makes it really difficult for the government to go after him, because he’s actually carrying the water for the government in terms of making inroads into Hollywood,” University of Southern California political science professor Stanley Rosen said. “That’s an important aspect of government policy.”
Still, Rosen said that the deal was best explained in business terms for Wanda, a private company, allowing it to leap over competitors such as Alibaba Group (阿里巴巴), which is also expanding its presence in Hollywood. In addition, since Legendary’s primary focus is on US-style action movies, the opportunities for China to use the deal to increase its global “soft power” are limited.
“If you’re not promoting Chinese values and not promoting Chinese films overseas, how would this help Chinese power?” Rosen said by telephone.
Ticket sales in China grew nearly 50 percent last year to US$6.78 billion, according to government data.
Coming Legendary films include a Godzilla sequel that pairs the radioactive lizard with King Kong, and Warcraft, an expensive movie adaptation of the popular video game. Legendary releases its films in partnership with Universal Pictures, a division of the Comcast-owned NBCUniversal.
A spokeswoman for Legendary declined to comment.
A spokesman for Wanda, David Connolly, did not respond to a request for comment.
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