Bottom line: Wanda’s recent steam of announcements for multibillion dollar deals, including the latest for a $10 billion entertainment complex in Shandong, are mostly hype, and many will never get completed.
It used to be that I would get quite excited on seeing the word “billion” when used in connection with new investments, since such major sums are relatively rare. But these days the word is becoming almost a cliche in China, and one of the most egregious abusers of the figure is real estate and aspiring entertainment giant Wanda Group. True to that tendency, Wanda and its increasingly chatty chief Wang Jianlin have just announced yet another multibillion-dollar investment, this time for an entertainment complex in the industrial city of Jinan in eastern China’s Shandong province.
It seems that a simple billion dollars is no longer sufficient for Wang, who says this latest investment will be worth a whopping 63 billion yuan, or nearly $10 billion. Such huge amounts are rare even in the west, which leads one to wonder where exactly Wang is getting all his money for projects that often look dubious due to their strange locations.
One answer to that question is probably that local governments in cities like Jinan are pledging big amounts of money in a bid to attract headlines and boost their local economies. That leads to my next point, namely that many of these deals will never get completed, and are simply Wang’s way of grabbing attention as he tries to show he can compete with global names like Disney (NYSE: DIS).
Reflecting just how skeptical people are becoming about Wang’s nonstop stream of multibillion-dollar investment announcements, Reuters has given relatively little ink to this latest plan that would be major news if it came from any other company. According to the brief Reuters article, Wanda’s new mega-park would offer a mix of cultural, shopping and sports activities spread out over a 290 hectare site. (English article; Chinese article)
The massive complex would include a 10,000-seat stadium for hockey and basketball, with construction set to begin in 2017. There’s no additional detail about specific facilities, though presumably the complex would also include a theme park and shopping complex that are 2 of Wanda’s focus areas in its drive to build a global entertainment empire.
Anyone who thinks this particular plan sounds familiar would be correct, as Wanda has announced similar plans for 13 large-scale tourism projects in China alone over the last few years. One of those, a theme park in interior Jiangxi province, opened in May, shortly before the opening of the $5.5 billion new Disney Resort in Shanghai. (previous post)
Around the same time, Wanda also announced the ground breaking for a separate 16 billion yuan theme park in the picturesque tourist city of Guilin. And in February he announced plans for a $3.3 billion theme park in Paris, which would be the company’s first such project outside of China.
As if that wasn’t enough use of the “billion” word, Wang disclosed in an interview last week that he planned to sign 2 billion-dollar deals this year in the entertainment sector. (previous post) I speculated that one of those would be a bid for a stake in US film studio Paramount, and the other would be Wanda’s ongoing bid for US cinema operator Carmike (Nasdaq: CKEC). All that would come after Wanda last year purchased US studio Legendary Entertainment for $3.5 billion.
By now, anyone reading this should be starting to understand why I think that Wang is overusing the “billion” word, since his series of deals by now would probably total around over $30 billion. The word is also part of Wang’s personal fortune, which Forbes pegged at $28.7 billion earlier this year, making him the world’s 18th wealthiest man and first mainland Chinese to enter the list of the world’s 20 richest men.
I have a lot of respect for Wang and his ability to do big deals. But at the same time, I personally believe that his nonstop announcements of new multibillion-dollar deals is largely designed to grab headlines more than anything more serious. Accordingly, it’s quite possible many of his projects will fail to get built, after promised funds from third-party investors fail to materialize.
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