As U.S. investors flock to China in search of investments with
higher return, Chinese real estate conglomerate Dalian
Wanda has gone the other way and bought the second largest
theater chain in the U.S. -- AMC -- a move that's raised
[caption id="attachment_65536" align="alignright" width="300"
caption="The AMC Empire 25 theaters on 42nd St, New York City"]
It's a tough time for U.S. movie theaters. Attendance fell to
1.28 billion last year, the lowest in 16 years, and it's expected
to fall even further from 2013 to 2016.
Things are especially not looking up for the cash-strapped AMC,
in need of long-overdue maintenance. "AMC is not growing and
it is not going to grow", says Michael Pachter, analyst with
So why does Wanda, also China's biggest theater owner with
box office growth of 29%, find AMC an appealing takeover
Although Wanda may not get much of a financial return from its
$2.6 billion investment in AMC
, analysts say it is a well-thought strategic move for the
company's larger ambition.
Analysts believe Wanda is using Hollywood as a stepping stone to
learn the ropes of the US film industry and better develop
China's domestic movie market. The company may be interested
in being taken seriously by Hollywood as an industry player,
want to have a seat at the table, and help to shape what the public
is interested in.
If Wanda is aiming to better understand the U.S. film market,
and urge the Chinese government to open up trade to allow more
films in China, the acquisition makes a lot more sense from a
strategic perspective. Wanda will end up benefiting tremendously
from that, says Pachter, because the company will make money not in
the U.S., but in China.
The acquisition may also aid Wanda in its much-anticipated
Chinese IPO by adding an international name to the company's
assets, which could make president and chairman Wang Jianlin
the richest man in China.
The Dalian-based Wanda, with an annual revenue of ¥105 billion
($16.5 billion) and an expected revenue of ¥140 billion ($22
billion) for 2012, has shown great ambition recently, making some
speculate AMC is part of a larger plan.
Wanda is looking at other Western theater groups for more
takeover targets, and has set a goal to achieve 20% of industry
market share by 2020. Earlier this month the conglomerate sank
another $3 billion into Russia's North Caucasus Resorts to develop
tourism in the region.
"I am guessing this is probably the tip of the iceberg for
Wanda," says Eric Handler, media and entertainment analyst with MKM
partners. AMC could be Wanda's first step into larger real estate
ventures that may include malls, hotels, and other commercial real
Wanda bought AMC for $2.6 billion including AMC's $2.3
billion in debt, the largest overseas acquisition for the
Chinese entertainment sector. The deal was seen as an
"opportunistic" buy by analysts. AMC has been dealing with debt
issues after the company failed to go public in 2007.
AMC seems a good candidate for Wanda. It was searching for an
acquisition target that would allow it to have a significance
presence in the North American movie theater
industry. AMC has theaters in many major metropolitan markets,
and among the big players, there frankly weren't many choices. Both
) and Cinemark (
) are not for sale.
The acquisition will bring a fresh infusion of capital to
AMC. "Some of the theaters don't look as nice as they probably
could," says Handler, "if they could have a little bit of a