China’s cash clampdown reaches Hollywood

Deal for Dick Clark Productions hits snag

The Chinese government’s recent clampdown on money leaving the country has reached Hollywood’s doorstep.

Dalian Wanda Group’s agreement to buy Dick Clark Productions, producer of the Academy of Country Music Awards, for $1 billion appears to have hit a snag nearly four months after the acquisition was announced.

Wanda, run by billionaire Wang Jianlin, is having trouble getting its capital out of China to pay for the production company, according to people familiar with the situation who were not authorized to comment.

A government curtailment of foreign investment could have far-reaching consequences in Hollywood, where major studios have become increasingly reliant on financing from China, which is now the world’s second-largest film market.

Studios and producers including Paramount Pictures, Sony Pictures and Steven Spielberg’s Amblin Partners have all recently signed film financing deals with Chinese business giants, including Wanda.

Wanda’s pursuit of Dick Clark, which also produces the Golden Globe Awards and “Dick Clark’s New Year’s Rockin’ Eve With Ryan Seacrest,” is not the first China-Hollywood deal to be affected by the government’s policy. Chinese copper company Anhui Xinke New Materials was set to buy “The Hurt Locker” producer Voltage Pictures for $350 million, only to have the deal recently scrapped under government scrutiny.

Other industries have been hit too. Barrick Gold Corp. has reportedly run into problems in its efforts to sell its stake in an Australian mine to a Chinese company, for example.

Chinese officials, fearful last year of a plummeting yuan, erected roadblocks to prevent capital from leaving the world’s second-largest economy. The government probed overseas acquisitions and created measures to curb what authorities call “irrational” outbound investment, making it more difficult for firms to receive permission to transfer yuan and close deals.

The policy is aimed at companies that are making investments far outside their expertise, entertainment lawyer Lindsay Conner said. That doesn’t apply to Wanda, which already owns theater chain AMC Theatres and film producer Legendary Entertainment, Conner noted.

“Wanda is certainly at the top of the list of companies that know what they’re doing,” said Conner, co-chair of the entertainment and media practice at Manatt Phelps & Phillips.

The regulations have particular resonance in the U.S., which received the greatest share of China’s outbound foreign direct investment last year at $45.6 billion, according to the Rhodium Group, a firm in New York.The group noted in a December report that Beijing was singling out sectors that received the biggest chunk of Chinese capital, such as entertainment. The report warned that the policy changes could affect pending transactions.

China’s outward investment in January declined nearly 36 percent from a year earlier, according to China’s Ministry of Commerce.

American studio executives also have been anxious about whether China will allow more movies into the country. The government now permits 34 foreign films into China annually under a revenue-sharing agreement. That agreement is up for renegotiation this year.

Wanda has been the target of calls by U.S. lawmakers to heavily scrutinize Chinese investment in U.S. industries, especially entertainment.