Bottom line: Wanda’s cautionary words to Donald Trump are unlikely to have much impact on the incoming US president, who is likely to take a more skeptical view of Chinese M&A in Hollywood.
Wanda Group founder and chief Wang Jianlin is used to getting what he wants, especially when it comes to overseas buying as he tries to build up a global entertainment empire. But one of China’s richest men is clearly rattled by the ambivalent or even hostile attitude towards his country by US president-elect Donald Trump.
Worried about the changing winds in Washington, Wang has turned to Hollywood’s mouthpiece, the Motion Picture Association of America (MPAA), to tell Trump that Hollywood could face huge consequences if he tries to shut down China’s recent buying binge. Wang has been Hollywood’s most enthusiastic shopper these days, purchasing cinema operator AMC Entertainment (NYSE: AMC) and studio Legendary Entertainment over the last few years. He also announced a recent deal to buy Dick Clark Productions, and recently signed a major co-production deal with Sony Pictures.
Wang estimates his investments in Hollywood have totaled more than $10 billion and employ more than 20,000 people altogether, according to remarks he made during a speech in Beijing on the internationalization of Chinese culture. (English article) He quickly adds that any meddling by US politicians in his buying spree could put those investments and the 20,000 jobs at risk.
Trump hasn’t publicly spoken out against any of Wanda’s dealings, but US Senator Chuck Schumer apparently has, implying that such takeovers are backed by Beijing. Here I should add that Schumer was also a strong critic of another cross-border deal that would have seen China’s Tsinghua Unigroup purchase leading US memory chip maker Micron Technologies (Nasdaq: MU) last year for $23 billion. (previous post) That deal ultimately collapsed due to the political opposition.
Previous reports have indicated that Wang’s recent buying spree may just be an appetizer, and that his ultimate goal is to purchase one of the big 6 Hollywood studios. Wanda was previously in talks to buy a stake in one of those, Paramount Pictures, but that deal ultimately failed to materialize after owner Viacom (NYSE: VIAB) had second thoughts about such a stake sale.
This latest twist of the “Wanda Goes to Hollywood” tale has several interesting threads, led by Wanda’s choice of the MPAA to make its views known to Trump. In my mind the MPAA was historically a relatively hostile voice to China, constantly accusing Beijing of not doing enough to clean up rampant piracy of Hollywood movies and TV shows. But those accusations have become far more muted over the last few years, replaced by a growing love affair between Hollywood movie makers and their Chinese peers, all eyeing the huge China market.
Still, this latest pairing between the MPAA and Wang does look a little uneasy to me. That’s because Hollywood can hardly afford to alienate Donald Trump just as he gets set to become the new US president. Trump hasn’t really spoken much on Chinese buying of US assets, especially in the sensitive technology and media sectors. But given his other views on China as a job thief, currency manipulator and unfair trader, Trump is unlikely to see Wang’s and China’s Hollywood buying binge in too positive a light.
As to Schumer’s belief that Wanda is simply a front for Beijing, I might have to disagree a bit. I would argue the Unigroup’s pursuit of Micron may have fit that description, since the former is closely tied to the state-owned Tsinghua University, China’s top science school. What’s more, Beijing has stated its desire to build up the Chinese chip industry, and made billions of dollars available to companies that are willing to help in that pursuit.
But the same isn’t true of the Hollywood buying spree, which is being driven more by commercial than political factors. That’s not to say there isn’t some politics involved, since China — and many other countries, for that matter — feel the US has disproportionate influence over world culture due to the towering influence of Hollywood. But in this case I really do think Wanda’s Hollywood pursuits are being driven by Wang’s desire to build up an entertainment empire, rather than any directive by Beijing.
At the end of the day, I’m sure that Trump will receive Wang’s message but is unlikely to pay it much heed. That’s because Wanda is hardly likely to sell any of those assets unless forced to do so, which seems unlikely and probably illegal. Even if it sold the assets, Wanda would be the largest loser since it would probably take big losses after buying those assets at hefty premiums. And probably few jobs would be lost, if any. All of this really seems like a lot of posturing, and I expect that the end result may see Wanda ultimately forced to scale back its Hollywood buying.