Internet giant Alibaba throws Chinese conglomerate Wanda a lifeline and buys US$744m stake in film unit

Chinese e-commerce giant Alibaba Group Holding has agreed to acquire a 7.66 per cent stake in Wanda Film, an A-share unit of Chinese conglomerate Dalian Wanda Group, for 4.68 billion yuan (US$744 million).

According to a filing on Monday evening by Wanda Film, Alibaba acquired its stock for 51.96 yuan a share, a bit lower than their closing price of 52.04 yuan – trade in the company’s shares has been suspended since July.

Cultural Investment Holdings, a public company controlled by the Beijing government, has also acquired a 5.11 per cent stake in Wanda Film for 3.12 billion yuan.

Dalian Wanda remains a controlling shareholder of Wanda Film, with a 48.09 per cent stake, followed by Alibaba, which owns the South China Morning Post, and Cultural Investment Holdings, according to the filing.

Alibaba’s investment follows closely a 34 billion yuan investment led by Tencent Holdings in January, for a 14 per cent stake in Wanda Commercial, the group’s property management platform. Tencent invested 10 billion yuan for a 4.12 per cent share, followed by other internet giants, JD.com and Suning Commerce Group.

“Interestingly, Wanda has become a company that has forged deep ties with Alibaba, Tencent and JD.com,” said Yan Yuejin, research director at E-House China, a Shanghai-based research and development institute. In the past few years, it has become normal that Alibaba and Tencent invest in rival companies in one sector. Cases such as Dalian Wanda, where they have invested in the same company, are rare.

The two deals mark a dramatic turn in fortune for Dalian Wanda chairman Wang Jianlin, who just a month ago was selling overseas properties to ease funding pressures and battling rumours that his empire was doom after antagonising Beijing.

“Alibaba’s investment could help the growth of Wanda’s film business and strengthen its leading position. The internet giant’s stake could facilitate exploration of new businesses, diversification and an asset-light model,” said Yan.

Wanda Film, which listed in January 2015, owns 516 cinemas and 4,571 screens, and controls about 14 per cent of China’s box office, according to the Wanda Film filing. Its revenue totalled 13.2 billion yuan in 2017. It also owns cinemas, film distribution and advertising businesses, movie critique and ticket websites, and gaming businesses.

Alibaba also owns a portfolio of assets in the cultural sector, including Alibaba Pictures, a Hong Kong-listed film company. The filing said the two sides would conduct “comprehensive cooperation” in film distribution, investment, online ticketing platforms, advertisements and derivative product sales.