The owner of China’s largest movie theater circuit took a big leap forward into the U.S. market, acquiring AMC Entertainment Inc., the nation’s second-largest theater chain, the latest in a flurry of high-profile deal-making between the countries’ entertainment industries.
Dalian Wanda Group, a Chinese conglomerate, said in a statement that it had reached an agreement to acquire AMC’s 5,034 screens in 346 theaters in the U.S. and Canada. The Kansas City, Mo., theater chain is owned by several investment firms, including JPMorgan Partners, Apollo Investment Fund and Bain Capital Investors.
The transaction is valued at $2.6 billion and would create the world's largest cinema owner, the companies said in a statement.
The deal marks the largest investment to date by a Chinese company in the U.S. entertainment industry and gives Wanda a foothold into the U.S. movie theater business in what some analysts viewed as a “trophy” acquisition.
Until now, most of the traffic was eastward, with U.S. studios and film companies expanding their business investments in China. This month, Chinese film distributor Bona Film Group announced that it had agreed to sell News Corp. a roughly 20% stake in the company. Walt Disney Co. of Burbank and DreamWorks Animation Studios in Glendale also have recently annnouced joint ventures in China.
For Wanda, the acquisition of AMC gives the Chinese theater operator a pipeline into two of the world’s largest theater markets, giving it more clout in negotiating with major Hollywood studios that are eager to expand into the rapidly growing Chinese market.
China saw a 30% increase in box office sales last year to $2.1 billion and this year passed Japan as the biggest foreign market for Hollywood films. The country is in the midst of a multiplex building boom to provide entertainment to a burgeoning middle class with the goal of having 25,000 movie screens in the next five years.
Leading much of the multiplex growth is Wanda Cinema Line Corp., which has 730 screeen in 86 multiplexes in China and has announced plans to increase its screen count to about 2,000 by 2015. The parent company, Wanda Group, which is based in the northeastern city of Dalian, is a major real estate developer, with interests in department stores and hotels.
The AMC acquisition fits China’s strategy of forming alliances with American companies to expand its homegrown entertainment industry and to cater to a burgeoning middle class to extend its global influence or “soft power.”
For JPMorgan, Apollo and the other owners, the sale to Wanda allows them to unload an investment they made when they bought the company back in 2004.