AMC Entertainment, the owner of the world’s biggest movie theater chain, is fighting back against speculation that Chinese government scrutiny of its largest shareholder, Dalian Wanda Group, would hamper its business.
AMC’s shares fell 10% Monday on Wall Street following reports that China was clamping down on overseas acquisitions by Beijing-based Wanda, the real estate conglomerate that has harbored ambitions to become a global entertainment powerhouse.
Wanda bought AMC for $2.6 billion in 2012. In recent years, AMC has grown by rolling up chains including U.S. rival Carmike Cinemas, Britain’s Odeon & UCI Cinemas, and Stockholm-based Nordic Cinema Group.
But AMC said in a statement Tuesday that Wanda did not finance its recent acquisitions, which have already been completed. The Leawood, Kan., theater owner does not rely on or expect financing from Wanda, the company said, adding that China-based banks have never been a source of funding for AMC.
“Wanda has been a terrific shareholder, and we are grateful for Wanda’s support of AMC’s efforts over the past few years to grow our business,” said Adam Aron, president and chief executive of AMC. “Wanda does not actively participate in the day-to-day running of AMC beyond the board of directors service of three Wanda executives side-by-side with six American directors on the AMC board.”
AMC shares rose 40 cents, or 2%, to $20.10 on Tuesday. The stock has declined in recent months partly because of a summer box office season that has largely disappointed.
Monday’s sell-off followed a report by the Wall Street Journal that Chinese banking regulators had met with state-owned lenders and told them six of Wanda’s recent foreign deals conflicted with government capital restrictions aimed to stem perceived risks to its financial system.
RBC Capital Markets analyst Leo Kulp said the effect on AMC may be overstated, saying owning movie theaters is a major part of Wanda’s long-term strategy and that there aren’t indications that Wanda is facing a liquidity crisis.
“Importantly, with all of AMC’s deals -- Carmike, Odeon and Nordic -- closed and the deals funded with AMC’s capital, we don’t [see] risk to AMC’s liquidity or underlying business,” Kulp said in a note to clients.
Wanda, run by Chinese billionaire Wang Jianlin, has sought to become an entertainment mogul in recent years by chasing Hollywood assets. Those lofty ambitions have hit multiple roadblocks along the way, though.
It bought Burbank production company Legendary Entertainment for $3.5 billion last year, but was not able to merge it with its publicly traded entertainment arm because of financial struggles. It later scrapped a deal to buy Dick Clark Productions, producer of the Golden Globes telecast, for $1 billion, amid government scrutiny of the high asking price.
2:30 p.m.: This article was updated with the closing share price for AMC.
This article was first published at 10:50 a.m.