Has Wanda’s overseas acquisitive drive hit a dead end?

PUBLISHED : Saturday, 08 July, 2017, 9:30am
UPDATED : Saturday, 08 July, 2017, 9:30am

Dalian Wanda Group, one of the largest conglomerates in China, hit a major bump in its overseas expansion when in March, it was forced to abandon a US$1 billion takeover of Dick Clark Productions after failing to fund the deal because of China’s capital controls.

To add insult to injury, it has become one of the few conglomerates to be probed by China’s banking regulators last month amid government’s concerns on capital outflows and being over leveraged.

While no wrongdoing was indicated, the revelation on June 22 that it was being investigated sent Wanda Film Holding, a Shenzhen-listed subsidiary of Wanda Group, tumbling 9.9 per cent in two hours. The company had to apply for a trading halt in the afternoon.

Other Wanda onshore and offshore bonds also slumped on June 22. And trading of Wand Film shares remains suspended.

Before the current lull, group chairman Wang Jianlin’s spate of acquisitions included a 2012 takeover of AMC Theatres for US$2.6 billion, a 2015 purchase of 20 per cent stake in Atletico de Madrid football club, and the US$3.5 billion acquisition last year of the Hollywood studio Legendary Entertainment.

At home, Wanda is pushing to expand in the theme park and tourism sector by opening the third “Wanda City” last week in Harbin. The park involves an investment of nearly $5.8 billion yuan.

Gross revenue of the group, with businesses ranging from property to entertainment to financial services, grew 17.9 per cent to total 134.8 billion yuan($19.8 billion) in the first six months. The 17.9 per cent rise excluded Wanda Tourism, which was acquired by ly.com earlier this year.

Among the Wanda units, the financial service sector recorded the fastest growth, with 46.8 per cent increase to 20.6 billion yuan in the first half. Its cultural industry sector grew 31 per cent to 30.8 billion yuan.

However, Wanda’s diversification came at the expense of its traditional property sector, as property revenue in the first half grew 11.3 per cent to reach 56.34 billion yuan. This contrasted with the aggressive expansion of its rivals. China Evergrande Group, for example, saw its first-half contracted sales surged 72 per cent to 244 billion yuan.

Share of Wanda Group’s property sector in its total portfolio declined to 42.1 per cent from 45 per cent at the end of 2016.