Too much, too fast?

Has Wanda’s shop­ping spree gone too far for the feds?

China Daily (USA) - - FRONT PAGE -

He’s the rich­est man in China and hasn’t been shy about his am­bi­tions to be a global en­ter­tain­ment mogul. He plans to open 15 theme parks across China and wants to “smash” park com­peti­tor Dis­ney. He’s al­ready ac­quired one Hol­ly­wood stu­dio and says he wants to buy one of the “Big Six”. And he owns the sec­ond-largest movie chain in the US.

“Con­sid­er­ing my per­son­al­ity and how the com­pany has been ex­e­cut­ing my plans, I think we will be No. 1 in the world in real es­tate, en­ter­tain­ment, tourism and sports,” he re­cently told CNN.

But for Wang Jian­lin, chair­man of Dalian Wanda Group, those US in­vest­ments are draw­ing the at­ten­tion of mem­bers of Congress con­cerned about for­eign ac­qui­si­tions. And some in­dus­try ob­servers in Hol­ly­wood say he may be go­ing too far.

“We’re start­ing to get to a tip­ping point be­cause you’re start­ing to see politi­cians in­volved,’’ said Marc Ga­nis, co-founder of Ji­aflix, an Amer­i­can dis­trib­u­tor of films in China. “I ad­mire Wanda and I think there’s a broader strat­egy here that will be­come more ap­par­ent that Wang is work­ing on.”

The alert came from 16 US law­mak­ers in a let­ter dated Sept 15 to the US Govern­ment Ac­count­abil­ity Of­fice (GAO), ex­press­ing con­cern over for­eign ac­qui­si­tions in “strate­gi­cally im­por­tant” sec­tors in the US. They cited Wanda’s pur­chase of Amer­i­can movie stu­dio Leg­endary En­ter­tain­ment for $3.5 bil­lion and its ear­lier pur­chase of AMC The­aters in 2012.

“Both of these ex­am­ples raise se­ri­ous security ques­tions about what author­ity CFIUS [Com­mit­tee on For­eign In­vest­ment in the United States] cur­rently has, or may need to be added, to ad­dress these con­cerns,” said the let­ter signed by 14 Repub­li­cans and two Democrats.

In other words, if Wanda con­tin­ues with its in­vest­ment dump in the US — which ex­perts see as vi­tal to de­vel­op­ing into a me­dia gi­ant — it could po­ten­tially trig­ger US reg­u­la­tory over­sight of the deals.

‘Over-wor­ried’

Wanda de­clined to com­ment to The New York Times re­gard­ing the let­ter, but on Sept 28, Wang told CNN that the law­mak­ers were “over-wor­ried.”

Wanda has been mak­ing head­lines in the last several weeks with its in­vest­ment al­liance with Sony Pic­tures and dis­cus­sions about ac­quir­ing con­trol of Dick Clark Pro­duc­tions.

The Sony deal is be­ing billed as an ope­nended part­ner­ship, where Wanda will in­vest in Sony films and take a role in high­light­ing “China el­e­ments” of the movies it in­vests in, a con­trast to the pas­sive roles Chi­nese in­vestors have played in the past, the com­pany said.

Ac­quir­ing Dick Clark Pro­duc­tions would put Wanda in charge of a com­pany that pro­duces pop­u­lar Amer­i­can award shows, such as the Golden Globe Awards, the Bill­board Mu­sic Awards and Miss Amer­ica.

In his Sept 28 in­ter­view with CNN, Wang also said that he would keep in­vest­ing in US com­pa­nies and was shop­ping for at least a 50 per­cent piece of one of Hol­ly­wood’s “Big Six” stu­dios.

It is a move that ex­perts warn could bring up anti-trust is­sues, since Wanda al­ready owns AMC and could po­ten­tially own Carmike Cine­mas as well.

Stan­ley Rosen, direc­tor of the East Asian Stud­ies Cen­ter at the Univer­sity of

Wang Jian­lin, chair­man, Dalian Wanda Group

South­ern California, said that Wanda has to “be a lit­tle bit wor­ried about how much they can push at this point, and they may want to stand back a bit” if they want to pre­vent more at­ten­tion from reg­u­la­tors.

Rosen said Wanda has been get­ting a lot of neg­a­tive at­ten­tion re­cently with its on­go­ing bat­tle with the Bev­erly Hil­ton for de­vel­op­ing a $1.2 bil­lion real es­tate project di­rectly across the street from the Bev­erly Hil­ton ho­tel.

Union com­plaint

A ho­tel work­ers union filed a com­plaint in Septem­ber with the California Fair Po­lit­i­cal Prac­tices Com­mis­sion and the FEC ac­cus­ing Wanda of us­ing its fi­nan­cial in­flu­ence to op­pose a bal­lot mea­sure spon­sored by the Bev­erly Hil­ton.

“It’s ironic in the sense that Wang Jian­lin and Wanda wanted to be as high pro­file as pos­si­ble, pay­ing too much for AMC but get­ting a tremen­dous amount of pub­lic­ity,” said Rosen, but now the pub­lic­ity “may come back to bite him in a sense be­cause it makes him seem like a vac­uum cleaner, just pil­ing up as­sets, some of which are rais­ing red flags in the US.”

Po­ten­tial reg­u­la­tory ac­tion against Wanda could have a le­gal prece­dent in the US. The most prom­i­nent an­titrust case in Hol­ly­wood had to do with a 1948 law­suit against Para­mount Pic­tures, in which it was de­cided that movie stu­dios own­ing the­aters — and there­fore de­cid­ing which the­aters could show their films — vi­o­lated US an­titrust laws. The land­mark case was said to have started the un­rav­el­ing of the old Hol­ly­wood stu­dio sys­tem.

“They don’t want some­one own­ing all the chan­nels and out­lets of dis­tri­bu­tion and ex­por­ta­tion,” said Christo­pher Spicer, a film-fi­nance lawyer with Akin Gump Strauss Hauer & Feld. “To me, if [Wanda] did ac­quire a stu­dio, it would come un­der scru­tiny. That to me would be an is­sue, and if you read the let­ter from the Congress mem­bers that’s what they’re get­ting at.”

Rosen said Wanda could con­tinue its “Big Six” stu­dio shop­ping by pur­chas­ing less than a con­trol­ling stake, but “it would be dif­fi­cult to pur­chase some­thing above 50 per­cent.”

Spicer said he sus­pects Wanda def­i­nitely wants to ac­quire an­other stu­dio, but he says fears that Wanda own­er­ship would al­ter the Hol­ly­wood land­scape may be mis­placed.

“If that hap­pens, I really don’t know how — in terms of gov­ern­men­tal anti-trust rules, with ow­ing such a mas­sive amount of the­aters — that would work,” Spicer said. But “from what it seems Leg­endary is still run ex­actly the same way it was six months ago. I haven’t talked to any­one who’s said ‘Leg­endary is so dif­fer­ent in its oper­a­tions now.’”

Wang has made it no se­cret that he wants to beat Dis­ney at its own game, say­ing that in the en­ter­tain­ment and tourism realm, Wanda and Dis­ney were “archri­vals.” He said his am­bi­tion to best the me­dia con­glom­er­ate is “not per­sonal — it’s where the in­ter­est of the com­pany lies.”

Com­ment­ing on Dis­ney’s theme park in Shang­hai, Wang has said that the com­pany never should have en­tered China.

Tigers and wolves

“Its fi­nan­cial prospects don’t look so good to me,” Wang said, adding that the com­pany’s strat­egy was “‘One tiger can­not com­pete with a pack of wolves.’ Shang­hai has one Dis­ney, but Wanda has 15 to 20 [theme parks] across China.”

Rosen said that Dis­ney’s en­trance into China “really ran­kles” Wang.

“It’s one thing to com­pete in the US, but when they come onto your home ter­ri­tory, that’s to him un­ac­cept­able. It’s very ironic, be­cause Wang’s com­ing into the US and com­pet­ing with these com­pa­nies,” he said.

A Dis­ney spokesper­son told CNN that Wang’s com­ments were “not wor­thy of a re­sponse,” adding that Dis­ney had wanted to build a theme park in China since the 1990s, fi­nally open­ing one on the Chi­nese main­land in June af­ter spend­ing more than $5.5 bil­lion, five years of con­struc­tion and a decade of plan­ning.

Ga­nis said Wanda’s over­all strat­egy seems to par­al­lel Dis­ney’s from the 1960s, when the com­pany started covertly pur­chas­ing parcels of land in Florida to build its sec­ond theme park in the US, even­tu­ally build­ing the “largest, best, and most well-run en­ter­tain­ment com­pany the planet” has ever known.

Read­ing tea leaves

“[Wang] can’t do it anony­mously like [Dis­ney] did with the land in Florida,” he added, “but I see what he’s do­ing and it ap­pears what he and what Wanda are do­ing is buy­ing a lot of as­sets as they be­come avail­able — that’s the op­por­tunis­tic part — and in some cases over­pay­ing, but with the idea that the to­tal­ity will be worth far more than the in­di­vid­ual pieces added to­gether.”

“He’s made many pub­lic state­ments about Dis­ney, so we don’t have to read too many tea leaves,” he said.

Wanda opened its sec­ond theme park late Septem­ber in He­fei, cap­i­tal of An­hui province, spend­ing $3.6 bil­lion. The 365-acre at­trac­tion has an out­door theme park, in­door wa­ter park, lux­ury ho­tels, cin­ema at­trac­tions, and a shop­ping mall, ac­cord­ing to the Hol­ly­wood Re­porter. Wang said at the open­ing cer­e­mony that it would in­vest an­other $1.5 bil­lion to build in­door en­ter­tain­ment fa­cil­i­ties at the park in the next few years.

Wanda’s am­bi­tion to de­velop into an en­ter­tain­ment em­pire with a strong sports com­po­nent grew big­ger re­cently when Wang an­nounced on Sept 30 deals with ma­jor sports en­ti­ties, with a clock run­ning on the year for some rea­son.

“As long as time per­mits, Wanda will an­nounce an­other one or two part­ner­ship agree­ments with ma­jor in­ter­na­tional sports fed­er­a­tion be­fore the year ends,” he said. “We have been re­al­iz­ing our am­bi­tion.”

As for his buy­ing spree in Hol­ly­wood, and what ef­fect it might have on na­tional security con­cerns on Capi­tol Hill, time will tell. But Christo­pher Spicer of­fers some per­spec­tive.

“There’s a long his­tory in LA — and Hol­ly­wood specif­i­cally — of for­eign­ers com­ing in and mak­ing in­vest­ments and peo­ple here view it as a pos­i­tive,” he told China Daily.

“The stu­dios al­ways want a pipe­line to co­fi­nance their movies, to the ex­tent that Wanda will co-fi­nance movies,” he added. “But peo­ple will al­ways take the money, whether it comes from China, Rus­sia, or Ger­many, for the most part. We’ll take the check, there’s no prob­lem there.”

One tiger can­not com­pete with a pack of wolves. Shang­hai has one Dis­ney; Wanda has 15 to 20.”

Wang Jian­lin, Dalian Wanda Group chair­man, has in­vested heav­ily in Hol­ly­wood over the last few years. He has said that Wanda would be in­ter­ested in pur­chas­ing one of the “Big Six” Hol­ly­wood stu­dios. Wanda al­ready owns Leg­endary En­ter­tain­ment and AMC En­ter­tain­ment. Top, some of Wanda’s hold­ings.

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