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China's Wanda Group is in talks to buy a 49% stake in Paramount Pictures

China's Wanda Group is in talks to buy a 49% stake in Paramount Pictures
Viacom had narrowed the field of potential Paramount bidders to two companies. (Anne Cusack / Los Angeles Times)

Viacom Inc. is in advanced talks with the Chinese entertainment conglomerate, Dalian Wanda Group, which is seeking to buy a 49% stake in the Paramount Pictures movie studio.

Viacom had narrowed the field of potential Paramount bidders to two companies, according to a knowledgeable person. But in recent days, Viacom Chief Executive Philippe Dauman began negotiating exclusively with Wanda, according to a second person who was not authorized to discuss the situation.

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Dalian Wanda Group, run by Chinese billionaire Wang Jianlin, owns the largest theater chain in China and has been swiftly bulking up its holdings in the U.S. entertainment industry. His company bought Burbank production firm Legendary Entertainment for $3.5 billion earlier this year, and a historic Hollywood movie studio such as Paramount would be a crown jewel in the company's portfolio.

Dauman has been eager for a sale of a significant stake in Paramount to boost Viacom's share price in advance of the company's earnings report next month. Some Wall Street analysts have trimmed estimates for Viacom after the Paramount movie, "Teenage Mutant Ninja Turtles: Out of the Shadows" turned in a disappointing box office performance.

However, it is not clear whether the proposed sale of the Paramount interest will go forward.  Viacom's management has been locked in a bruising battle with the company's controlling shareholder, Sumner Redstone, and Redstone has said that he doesn't want to sell any piece of Paramount.

In addition, recent changes made to Viacom's bylaws require a unanimous vote by Viacom board members, and Sumner Redstone and his daughter, Shari Redstone, sit on the board.

"Unless Viacom's board presents a concrete plan that convinces him otherwise, Mr. Redstone continues to believe that it is in the best interest of Viacom that Paramount Pictures should remain wholly owned by the parent company," a spokesperson for Redstone said in late May.

Wanda already has strong business ties with Paramount. Earlier this year the company invested in "Teenage Mutant Ninja Turtles: Out of the Shadows." Wanda previously worked with Paramount to promote movies in China such as an earlier "Ninja Turtles" movie, "Transformers: Age of Extinction" and "Terminator Genisys."

"Buying a significant stake in a major studio would be a jewel in Wanda's crown," said Lindsay Conner, an entertainment industry lawyer and partner in the firm Manatt, Phelps & Phillips.

A Viacom spokesman refused to comment.

Viacom's negotiations with Wanda were originally reported by Reuters and the Wall Street Journal.

Last week, Viacom urged a judge to expedite legal proceedings in Delaware over whether the Redstone family investment vehicle, National Amusements, could remove five Viacom board members, including Dauman.  A Viacom lawyer said that any delay in resolving the high-stakes boardroom battle could hamper the company's efforts to raise money by selling a stake in Paramount.

"Viacom continues to pursue a publicly disclosed potential transaction involving, in part, a minority investment in its subsidiary, Paramount Pictures," Viacom attorney Edward B. Micheletti wrote in the Delaware filing.  "A cloud over any such transaction has been placed in the name of Sumner Redstone by attempting to amend Viacom's bylaws."

Wanda in 2012 bought theater circuit AMC Entertainment for $2.6 billion. The Kansas based AMC has been on its own buying spree, announcing Tuesday that it had reached an agreement to acquire London-based exhibitor Odeon & UCI Cinemas Group from a private equity firm to boost its business overseas. That deal is valued at $1.2 billion, including debt.

AMC also is trying to buy Carmike Cinemas for $1.1 billion, but some Carmike shareholders have demanded a higher price.  Last month, Carmike postponed a shareholder vote on the transaction, and AMC Chief Executive Adam Aron said the deal was "at considerable risk."

Wanda has long been considered a potential bidder for a stake in Paramount Pictures after Viacom said it might be interested in taking on a foreign investor.

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Paramount is said to have received a great deal of interest since it announced it was looking for a buyer for as much as 49% of the struggling studio, but many potential interested parties have balked at the idea of owning a minority stake, preferring to buy the whole studio.

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