The highly publicized $1-billion deal to sell
Dick Clark Productions owner Eldridge Industries said Friday that it had called off the blockbuster agreement after Wanda, which announced plans to purchase the TV production company in November, failed to complete the sale.
The acquisition of Dick Clark Productions, which produces the "Golden Globe Awards," "Academy of Country Music Awards," and "Dick Clark's New Year's Rockin' Eve With Ryan Seacrest," would have been Wanda's first foray into television, adding to its formidable arsenal of film and cinema assets.
But Wanda, and the Chinese government, ultimately balked at the hefty purchase price promised to Dick Clark Productions, according to multiple people familiar with the matter who requested anonymity because they were not authorized to comment.
The failed acquisition is a setback for Wanda and its billionaire chairman, Wang Jianlin, who has been one of the most aggressive Chinese players in the global entertainment industry. Wanda owns the world's largest theater chain AMC Theatres, as well as large cinema circuits in China and Europe, and has been willing to pay significant premiums for entertainment and sports companies. Now, however, there appears to be a limit on what it will spend to add a new piece to its empire.
"The Chinese government is forcing Chinese companies to pay more attention to price, which is a good thing," said Marc Ganis, co-founder and managing director of Jiaflix Enterprises, which helps studios distribute movies in China. "This is part of the process of the maturation of Chinese capital markets. It brings a little more rationality to the business."
Eldridge, the investment firm run by Todd Boehly, accused Wanda of failing "to honor its contractual obligations," and filed suit in Delaware Chancery Court seeking payment of its $25-million breakup fee in addition to the $25 million Wanda already paid to extend the closing date of the transaction.
Representatives for Wanda declined to comment.
The scuttled pact represents another stumble for Wanda as it tries to advance its Hollywood ambitions beyond owning movie theaters and
Compounding matters, Legendary Entertainment, the Burbank production company Wanda bought for $3.5 billion last year, has been hit with recent box office disappointments including “The Great Wall” and “Warcraft.” Legendary Chairman and Chief Executive
Insiders had long speculated that the Dick Clark Productions deal was on shaky footing. There had been growing concerns within Wanda and the government that the company would be vastly overpaying for Dick Clark Productions. A group of investors led by Guggenheim Partners bought it for $380 million less than five years ago.
Wanda had also hoped that buying Dick Clark Productions would give the Chinese company control of popular awards shows, including the Golden Globes. But the reality proved to be more complicated. Although Dick Clark Productions has the rights to produce the ceremony for television, the awards themselves are controlled by the Hollywood Foreign Press Assn., limiting Wanda's influence.
"The question on the Wanda side is, how did they let it get so far down the line before it fell apart?" said a film industry executive with ties to China who asked not to be named to protect business relationships.
Political factors probably contributed to the eventual collapse of the transaction. There is growing pressure on both countries' regulators to more heavily scrutinize major cross-border acquisitions and investments.
Protectionist rhetoric by the
"The hit to their credibility and the multifaceted attacks they are facing make this a challenging time for Wanda and Wang Jianlin," said Stanley Rosen, a USC political science professor and China expert.
Chinese officials, fearful last year of falling currency values, tightened restrictions on capital leaving the world's second-largest economy. The government stepped up oversight of foreign acquisitions and tried to curb "irrational" outbound investments. That made it more difficult for firms to receive permission to transfer yuan and close deals.
Though Chinese policymakers generally favor diversifying the nation’s wealth overseas, they have grown concerned over the pace of outflows. China needs a sizable stash of foreign reserves to stabilize its currency and meet benchmarks set by the
The government clampdown has far-reaching implications for Chinese companies looking to invest in the U.S. entertainment industry. Regulatory issues recently resulted in Chinese copper company Anhui Xinke New Materials scrapping plans to buy "The Hurt Locker" producer Voltage Pictures for $350 million.
The Chinese government actions are also said to have put the brakes on Shanghai Film Group and Huahua Media's plan to invest up to $1 billion in Paramount Pictures' film slate over several years. The Chinese investors are also looking for more details on Paramount's turnaround plan and search for new leadership, according to people close to the companies. The crackdown also reportedly derailed talks to sell storied film and TV studio Metro-Goldwyn-Mayer to a Chinese company last year.
But while the capital controls are problematic for smaller companies with few foreign holdings, they shouldn't be an issue for a corporate giant like Wanda, which has a web of business interests overseas. The firm is still expected to pursue entertainment acquisitions and has long held ambitions to own a full-fledged studio.
"Wanda is one of the most global Chinese companies and already has billions of dollars in overseas assets," said Thilo Hanemann, an economist for Rhodium Group, a research firm. "Those have significant foreign currency cash flow and they can serve as collateral for debt financing. Wanda should be able to get that deal done if it really wants to, despite Chinese capital controls."
Times staff writer Meg James contributed to this report.
3:15 p.m.: This article has been updated with additional background and analysis of China's capital restrictions.
March 10, 6:50 a.m.: This article has been updated with an Eldridge statement confirming that the Dick Clark sale to Wanda has been called off.