Chinese cinema firm to buy AMC in $2.6-billion deal
A Chinese conglomerate took a big leap forward into the U.S. market late Sunday by acquiring AMC Entertainment Inc., the nation’s second-largest theater chain.
It was the latest in a flurry of high-profile deals between the nations’ entertainment industries.
Dalian Wanda Group said in a statement it had reached an agreement to acquire AMC’s 5,034 screens in 346 multiplexes in the U.S. and Canada. AMC, based in Kansas City, Mo., is owned by several investment firms, including JPMorgan Partners, Apollo Investment Fund and Bain Capital Investors.
The transaction, valued at $2.6 billion, would create the world’s largest cinema owner, the companies said in a statement.
The deal, in the works for a year, marks the largest investment to date by a Chinese company in the U.S. entertainment industry. It gives Wanda a foothold in the U.S. movie theater business through what some analysts view as a “trophy” acquisition.
Until now, most of the deals were in the other direction, with U.S. studios and film companies expanding their business investments in China. This month, Chinese film distributor Bona Film Group announced it had agreed to sell News Corp. a roughly 20% stake. Walt Disney Co. of Burbank and DreamWorks Animation Studios in Glendale also have recently announced joint ventures in China.
For Wanda, acquiring AMC gives it a pipeline into two of the world’s largest theater markets — and more clout in negotiating with major Hollywood studios eager to expand into the rapidly growing Chinese market.
“This transaction will help make Wanda a truly global cinema owner, with theaters and technology that enhance the moviegoing experience for audiences in the world’s two largest markets,” said Wang Jianlin, Wanda’s chairman and president.
As part of the transaction, Wanda said it intends to invest as much as $500 million in AMC.
“As the film and exhibition business continues its global expansion, the time has never been more opportune to welcome the enthusiastic support of our new owners,” AMC Chief Executive Gerry Lopez said.
Last year, China saw a 30% increase in box-office sales to $2.1 billion. This year it passed Japan as the biggest foreign market for Hollywood films.
The nation is in the midst of a multiplex building boom to provide entertainment to a growing middle class.China’sgoal is to have at least 25,000 movie screens in the next five years.
Leading much of the multiplex growth is Wanda Cinema Line Corp., with 730 screens in 86 multiplexes in China. Wanda had already announced plans to increase its screen count to about 2,000 by 2015. The parent company, Wanda Group, based in the northeastern city of Dalian, is a major real estate developer, with interests in department stores and hotels.
The AMC acquisition fitsChina’sstrategy of forming alliances with American companies to expand its homegrown entertainment industry and extend its global influence, or “soft power.”
For JPMorgan, Apollo and the other owners, the sale enables them to unload a property they acquired in 2004. The companies have been eager to recoup their investment after several attempts to sell the company or hold an initial public stock offering have failed.
AMC recently shelved plans to raise as much as $450 million to pay down debt, although it has yet to formally withdraw its IPO plans in a regulatory filing, according to sources not authorized to talk about the plans.
Some industry analysts said it’s less clear what Wanda gets from the deal. They questioned the strategic value of Wanda owning a large theater chain in North America, given long-term attendance declines.
The number of tickets sold at theaters in the U.S. and Canada fell to 1.28 billion last year, a 4% decline from 2010 and the lowest level since the mid-1990s. Ticket sales and admissions have rebounded this year thanks to a crop of strong movies such as"The Hunger Games"and “The Lorax.”
But other observers predicted Wanda would benefit from buying AMC.
“The guesswork is over. China has really arrived on the global stage on the cinema side,” said Rance Pow, president of Artisan Gateway, an entertainment consulting firm. “This will give Wanda a big operating advantage in China as they will now have access to global prices for everything from 3-D glasses to popcorn.”
Although no major U.S. theater chain has expanded into China, RealD Inc. in Beverly Hills has partnered with Beijing SAGA Luxury Cinema Management Co. to equip the Chinese theater chain with 3-D technology.Imax Corp., the Canadian big-screen theater company, formed a joint venture with Wanda to open 75 theaters by 2014.
“Wanda is really committed to investing in the business,” said Richard Gelfond, chief executive of Imax. “They are prepared to really upgrade AMC’s facilities. I think they are in it for the long term.”
AMC already has forged ties with China’s film industry. In an effort to experiment with different types of films, in the fall of 2010 AMC launched a partnership with China Lion, a Los Angeles company that distributes Chinese films to North American theaters.
Hollywood studios have been frustrated by rampant piracy in China and tight restrictions on the number of foreign films it allows into the country each year under a revenue-sharing agreement.
China recently agreed to ease some of the restrictions, allowing in more foreign movies and increasing the amount of revenue studios can collect from box-office ticket sales there.
Wanda has been in the news recently because its chairman, Wang, is reportedly under investigation for ties to disgraced Chongqing Communist Party chief Bo Xilai.
Bo was sacked and accused of corruption, and his wife has been charged with the murder of a British businessman. Bo was once a senior official in Dalian, site of Wanda’s headquarters.
Times staff writer David Pierson in Beijing contributed to this report.
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