The empire begins... AMC and Wanda complete historic acquisition
It’s official: AMC, A Wanda Group Company. On Sept. 4, 2012, at AMC Century City 15 an IMAX in Los Angeles, the history-making, US$2.6 billion acquisition of AMC Entertainment Holding, Inc. by China’s Dalian Wanda Group Co Ltd. was concluded, creating the world’s largest cinema owner and operator. In attendance were Dalian Wanda Group chairman Wang Jianlin and AMC’s president and chief executive officer, Gerry Lopez. Richard Gelfond, chief executive officer of IMAX Corp., also joined the podium. “The entertainment world is really globalizing in a very rapid way,” he noted.
In his warm welcome of Chairman Wang, Lopez highlighted what had impressed him personally and the AMC leadership team about Wanda when they first visited in December 2010. (For additional information, please refer to our August 2012 interview with Mr. Lopez) “First, I see the enthusiasm Wanda has for the arts. Particularly, of course, for the movie business, but it goes beyond that,” Lopez explained. “Chairman Wang is also one of biggest collectors of Chinese art and calligraphy. So their interests in the arts go well beyond just a single point of business.”
Secondly, he assessed Wanda to be “long-term folks [who] don’t run their business on a week-in, week-out or quarter-in and quarter-out basis. They are investing for the long term.” Lopez lauded Wanda’s “unmatched commitment to invest...at this juncture in the history of our industry.” In fact, he noted, “they pride themselves in running world-class assets in all areas of their business activities.” Last but not least, he mentioned “the integrity around Chairman Wang and Wanda,” which guaranteed that everything was handled with full transparency throughout. “Wanda is one of great private-enterprise successful stories of China.”
Powerful and secure enough to be humble, Chairman Wang greeted the press by saying, “Sorry, I can only speak Chinese.” This was omitted by his own translator, who appeared to polish the Chairman’s words and relay the scripted translation instead. However, those omitted and unpolished words offered the Mandarin-speaking audience finite accents and detailed nuances of the Chairman’s character. The following recounts almost word-for-word the Chairman’s original speech. For the readers of Film Journal International, nothing is lost in translation.
Addressing both reporters and AMC as “friends,” Chairman Wang said he was very glad to have come from Beijing. “On behalf of my 60,000 colleagues at Wanda Group, I would like to thank every guest for coming to this…ceremony. Wanda can be called an example of Chinese private enterprise. Everyone knows that there are two parts to Chinese enterprise. One is state-owned; the other one is privately owned. In recent years, private enterprises have been growing rapidly. By the end of 2011, private enterprises have contributed nearly 55% of the GDP, and over half of the tax revenue and provide nearly 80% of China’s total job opportunity. In every aspect, the private enterprise has become the main force of the Chinese economy.
“With rapid growth of the private economy, the small business, sole proprietors…have grown to an annual income of over 100 billion RMB [roughly $15 billion]. Therefore, many companies have not only done business trans-regionally in China, they also have the will and capacity to go global. Wanda is one of those companies. We have grown more than 40% over the last five years. Continuing our ‘normal’ growth speed, within three years, perhaps even in 2012 already, we will able to get in line with the World Top 500, with total revenues of around $45 billion. Because our growth is taking place so fast, we have developed global strategic goals, in addition to the development in China. The acquisition of AMC became our first step of globalization.
“During the [acquisition] process, we had the support of the original shareholders, the relevant government agencies in the United States and China, and, especially, the AMC management team led by Gerry Lopez. With their assistance, the process was very short and very simple. We were able to quickly complete the job. This became the biggest acquisition and merger in the United States by a Chinese company in 2012, as well as in recent years.
“The point in which we are different from the previous AMC shareholders is that, after we bought AMC, we will never sell it. Because Wanda also has a business sector that operates a chain of cinemas. We want to do it on a bigger scale. The reason for buying [AMC] is to develop it, to support it, to do better. [Therefore] we also promised to invest $500 million over the next three years to upgrade a rather large number of the AMC theatres. Our first installment of $50 million has already been paid to AMC, and the remaining $450 million will be released according to AMC’s plans. As long as they have the plan, the funds will be released promptly. From this perspective, you can say that we are a better shareholder.”
During the following Q&A session, AMC’s Lopez clarified these numbers further. Whereas $50 million had already been used to retire outstanding debts during the preceding week, Wanda’s capital infusion, he said, would allow AMC “to accelerate the original plan” for upgrading theatres and innovation to four years, down from eight to nine. Mentioning $120 million in capital expenditures already taken by AMC over the past three years, the remaining Wanda funds of $450 million “will be spent in addition to monies that AMC generates internally.”
Internationally, the Chairman outlined Wanda’s globalization strategy to be focused on North and South America, Europe and India, with “our main investment area” remaining the United States. “Our globalization has not had a clear schedule yet,” he admitted in response to a question. “It is an overall idea,” for which he then laid out areas of interest. “We will invest at least $10 billion in the United States over the course of ten years. First it is cinema chains. AMC is the first step, [followed by] rather large cinema chain acquisition in Europe and Oceania/Australia” over the next one to two years. The second and third areas are department stores and hotels, Chairman Wang continued. “Not buying hotels, but acquiring large hotel management companies. That alone could need about $10 billion,” he confirmed. “If there is such a company available, we are interested. Wanda’s biggest advantage is our excellent cash flow, and excellent profit every year.” To back up this statement, he said that over the last three consecutive years, Wanda was “the number-one tax contributor in China among the private enterprises. That means that we have been making good profits.”
These profits could lead to additional cinema ownership in the United States as well, the Chairman acknowledged. “It would not be me doing the merger and acquisition, it would be AMC. If AMC evaluates a company and is okay with it, and the relevant U.S. agencies grant their approval, we would continue our acquisition.” A reporter from The Financial Times wondered what attracted Wanda, which is already operating in the world’s fastest-growing theatrical market, to expand into the rather flat, if not declining, business in the United States. “You don’t put all the eggs in one basket,” the Chairman responded with a Chinese saying that is equally known to Americans. “From the company’s strategic development angle, China is still our base camp. Seventy to eighty percent of our business is in China. Most significantly, the main profit source is from China. However, we have money now, and we are hoping to do our business in other counties in the world, including the major economies.” Ten years from now, Wanda hopes to “become a transnational corporation that everyone in the world knows, rather than a huge but merely Chinese corporation. This is our strategic goal.”
On the current economic state of theatrical exhibition in North America, he opined, “You cannot simply look at just one moment and one place. If we are able to build the channels with world major economics, major information flow, and major talents, perhaps the new profit-making opportunity will emerge.” As for the opportunities to expand into film and television channels, Chairman Wang revealed that he was going to meet with five top studio executives. For him, cooperation on content “is one of our main purposes of this trip” and might include “setting up investment funds for production or setting up joint ventures for film production.”
Lastly, this author wanted to know whether the rumors are true that the acquisition of AMC is intended to facilitate Wanda’s IPO in China. On the contrary, Chairman Wang explained that this actually slows down the plans. “According to Chinese government regulations, the acquisition of a foreign company, by principle, requires that it is making a profit for three consecutive years before the IPO.” As the plans for taking Wanda Cinema Line public had already entered “into the final stages,” the relevant agency in China requested an explanation since we “acquired a company whose assets are bigger,” he explained. “Whether or not we can be exempted [from that regulation] is in question. Wanda Cinema Line has very good credit and is an excellent business. I can tell you, so far, there is not one borrowed penny on our books.”
Why not wait until after the IPO in China? “AMC’s original shareholders represented in several funds said it must be purchased now… We have a saying in China, ‘If it is gold, it will always shine.’ Launching our IPO this year, or next year, or the year after, it doesn’t matter. However, to buy this company, the opportunity could possibly come around just once. If I did not buy it, someone else might.”
In English, we have a saying too: The early bird catches the worm.