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Tag Archives: Wanda Group

News Digest: September 5, 2012 报摘： 2012年9月5日

By newsdoug on September 4, 2012

The following press releases and media reports about Chinese companies were carried on September 5. To view a full article or story, click on the link next to the headline.
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Japan’s NEC (Tokyo: 6701) to Sell Lenovo (HKEx: 992) Stake in $235 Mln Deal (English article)

Sharp New Exchanges in China Short Seller Showdown (English article)

SEC Charges China Sky One (Nasdaq OTC: CSKI) With Securities Fraud (English article)

Wanda Group Completes Acquisition of AMC Entertainment Holdings (Businesswire)

News Report Exposes Xiaomi Re-Selling Used Phones as New (Chinese article)

Wanda’s AMC Buy: The Show Isn’t Over Yet 万达并购美国AMC影院：表演还未结束

By newsdoug on May 22, 2012

The headlines are buzzing today with word that China’s leading theater chain operator Wanda Group has agreed to buy struggling US chain AMC Entertainment, calling it a landmark cultural exchange for Chinese firms expanding overseas. But to those applauding the deal, I would quickly caution not to celebrate just yet, as I see a greater than 50 percent chance that the sale will never close due to opposition from US politicians in this presidential election year. Let’s look at the deal first, which looks benign enough and was actually first reported 2 weeks ago when talks were in advanced stages. (previous post) Under their agreement, Wanda will buy struggling AMC from its current private equity owners for $2.6 billion, in what foreign media are calling the largest ever buyout of a US company by a Chinese one. (English article) Chinese media are noting the deal comes just a week after Rupert Murdoch’s News Corp (Nasdaq: NWSA) agreed to buy 20 percent of Bona Film (Nasdaq: BONA), a leading Chinese film distributor, implying the doors are opening in both directions to cross-border investment in the sensitive media and entertainment sectors. But anyone who follows Chinese investments in the US will know that US politicians love to get involved in anything even remotely sensitive, and that is even more likely to happen in this election year as candidates look for votes by portraying themselves as tough on China. That kind of grandstanding has led to problems mostly in the telecoms space so far, with China Mobile (HKEx: 941; NYSE: CHL), Huawei and ZTE (HKEx: 763; Shenzhen: 000063) all running into recent obstacles in their attempts to expand in the US. Politicians have also attacked the banking regulator for recently allowing several of China’s top banks to set up branches and make small acquisitions in the US for the first time, again reflecting how candidates are seizing on fears of these kinds of Chinese investments to raise their profiles. (previous post) Considering that movies are such a central part of American culture and that movie theaters are clearly a part of that picture, I could very easily see politicians raising objections to this latest deal, questioning the wisdom of letting such an important company into Chinese hands. Never mind that AMC and the theater industry in general are struggling due to tough competition not only from other theaters, but also from DVDs and newer products that let people watch and download movies over the Internet. The politicians won’t care about any of that, and they probably won’t care if AMC goes bankrupt in the end because no other company wants to buy it. All they will care about is looking tough against China in order to gain votes. All that said, I predict we will hear the first political objections to this deal within 2 weeks and potentially much sooner, and that all the negative publicity will give the deal a greater than 50-50 chance of ultimately collapsing, to the benefit of no one except the politicians.

Bottom line: The planned purchase of struggling US theater chain AMC by a Chinese buyer is likely to collapse due to objections from vote-seeking US politicians.

Welcome to the US Dollhouse, China Mobile 中移动和万达进军美国料将失败

By newsdoug on May 10, 2012

There are several interesting developments today on big-name Chinese firms moving into the US, highlighting both the opportunities but also the risks for increasingly assertive Chinese names looking to expand into a market that is at once the world’s largest but also highly suspicious of China. Leading the news is dominant wireless carrier China Mobile (HKEx: 941; NYSE: CHL), whose US expansion aspirations are reportedly running into trouble over familiar security concerns. (English article) That report is followed by another one saying Wanda Group, a real estate developer and owner of China’s largest movie theater chain, is in talks to buy some or all of AMC, operator of the second largest US movie theater chain. (English article) And last but not least, long-frustrated telecoms equipment maker Huawei appears to have found a new backdoor into the US through a new tie-up with local company Synnex (NYSE: SNX) to sell its enterprise products in the world’s biggest market. (English article) Let’s look at the China Mobile and Wanda-AMC developments first, as they’re certainly the newest and each provides an interesting challenge that many will be watching in the months ahead. US media are reporting that US national security officials, concerned about the potential for cyber-spying, may deny China Mobile’s recent request to provide mobile service between the US and China and to build facilities in the US. Their main concern is that China Mobile could use the US presence to gain access to local infrastructure that could then be used for spying and to steal intellectual property. This particular concern has become a popular refrain for Chinese telecoms firms trying to enter the US, with both Huawei and rival ZTE (HKEx: 763; Shenzhen 000063) both being denied access to the market numerous times due to similar concerns over the last year. Whereas Huawei and ZTE have both made significant efforts to improve their US images and ease spying concerns, I suspect that China Mobile has done little or nothing in this regard and for that reason its request is very likely to be vetoed. Meantime, other US media reports say that Wanda is talking with AMC’s private equity owners about buying some or all of the US theater chain, in discussions that began a year ago but have become more serious since then. Anything involving Chinese ownership in the US media space is also likely to be sensitive, despite China’s recent opening of its own media sector by allowing big names like Disney (NYSE: DIS) and DreamWorks Animation (NYSE: DWA) to form new animation joint ventures. Accordingly, I would also give this deal a good chance of failure, higher than 50 percent, both due to such sensitivities and also Wanda’s inexperience at this kind of overseas M&A. Lastly there’s Huawei, which is the most experienced in the US after a number of high-profile failed attempts to enter the market in the last 2 years. I quite like this deal with Synnex, which will see the US company sell Huawei routers and switches to US businesses for use in their internal networks, putting it in direct competition with Cisco (Nasdaq: CSCO). These kinds of smaller sales are much less likely to attract controversy than Huawei’s previous efforts to build bigger mobile networks in the US, and thus could actually succeed and give Huawei its first chance to make a serious inroads to the elusive market.

Bottom line: New efforts by China Mobile to enter the US and a Chinese real estate firm to buy US theater operator AMC are likely to fail due to sensitivities, while a new Huawei initiative could succeed.

Bona Opens New China Back Door 博纳欲与美国同行合拍电影中国同好莱坞恋情升温

By newsdoug on April 20, 2012

Bona in co-production talks The growing new love affair between Hollywood and China is taking yet another step forward, with news that New York-listed movie maker Bona Film (Nasdaq: BONA) is in talks with several major US studios to co-produce films for the China market. (Chinese article) In fact, such co-productions aren’t completely new, and many of the other studios have used them in recent years to circumvent a strict quota system that limits the number of foreign films that can be imported to China each year. But Bona’s plan looks particularly aggressive, presenting a potentially interesting proposition for foreign investors looking to buy into the China film story. According to the reports, Bona is talking with a number of major studios, including 20th Century Fox, Universal, Sony Pictures (Tokyo: 6753) and Paramount (NYSE: VIAb) about co-producing movies for the Chinese market. Furthermore, the company’s chief executive says his ultimate goal is to make 2 such co-productions a year. Such a large number would mark a big opening into China for the foreign studios, which until recently were only allowed to collectively export 20 of their films each year into China, now the world’s second largest movie market. Beijing recently increased the total by saying it would allow another 13 movies into the market each year using high-tech formats like 3D. Still, the appetite and potential for high-quality films in China is clearly capturing Hollywood’s attention, leading to a recent flurry of moves into China by the major studios. One of those moves, in fact, saw 20th Century Fox’s parent News Corp (Nasdaq: NWSA) take a 20 percent stake in Bona Film itself last month (previous post); accordingly, I wouldn’t be surprised if 20th Century Fox ends up signing the first co-production deal with Bona in this new round of tie-up talks. Bona’s talks come as other major studios are making their own new moves into China, amid increasing signs that Beijing wants to open the industry to more outside investment. Disney (NYSE: DIS) and DreamWorks Animation (NYSE: DWA) both announced new animation joint ventures in China earlier this year (previous post); and HNA Group and Wanda Group have both discussed major new moves to open and expand their domestic theater operations to accommodate the expected big influx of Hollywood-quality movies. (previous post) Another name to watch could be Huayi Brothers (Shenzhen: 300027), one of China’s other major privately held film studios with foreign experience, though that company has tended to focus more on co-productions with other Asian firms. Either way, these foreign-focused Chinese studios could make an interesting investment play into the market as it prepares for major expansion, with the potential to perhaps someday rival some of the major US entertainment giants.

Bottom line: Bona Films’ aggressive pursuit of foreign co-productions reflects the recent opening of China’s film industry, which is forging growing ties with Hollywood.

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