M&A

Summer slimmer

Wanda sells more assets after cash crunch

Wang-Jianlin-w

Wang Jianlin: time to focus

One of Winston Churchill’s many sayings was that “success is going from failure to failure without loss of enthusiasm”. Many of the world’s tycoons have personal experience of the maxim. Steve Jobs is a decent example: after being booted out of Apple and failing to make a success of his follow-up venture NeXT, he later returned to Apple, transforming it into the world’s most valuable firm.

Dalian Wanda’s Wang Jianlin might be hoping for a similar renaissance. He’s lost his title as China’s richest man to Jack Ma, but that may be the least of his problems. As we wrote in WiC375, Wang’s business empire has become a principal target for a government-led crackdown on debt-fuelled acquisition strategies that don’t fit the country’s ‘national interest’. And with banks refusing to extend new credit lines, Wang is having to shed his ambitions and his assets with indecent haste, refocusing on profitable businesses rather than simply getting bigger and bigger.

Or as Wang himself has put it, “Wanda has sold what should be sold and maintained what should be saved.”

Rating agency Fitch estimates that privately-held Dalian Wanda Commercial Properties (DWCP) cut its debt in July from Rmb124 billion ($18.57 billion) to Rmb41 billion after selling its hotel and tourism assets. The hotels were sold to Guangzhou R&F Properties for Rmb19.9 billion, and the tourism assets – which included Wanda’s hopes of rivalling Disney in theme parks and studios – went to Sunac China for Rmb38.8 billion.

Commercial Daily notes the group has also scaled back on its Belt and Road ambitions, pulling out of plans to bid for the $10 billion-plus Bandar property project surrounding Malaysia’s new high-speed rail terminus. According to the Economic Observer, Wanda’s financial arm has also bolstered its finances by selling an undisclosed stake to China UnionPay.

The group’s so-called ‘asset-light’ strategy took another major turn on August 8 when Wang repurposed his remaining listed entity, Wanda Hotel Development, by offloading international property worth nearly $5 billion to DWCP. Wanda Hotel Development then paid $944 million for a theme park design and management operator, plus $112.38 million for a hotel design and management company from two other group entities.

The Hong Kong-listed group’s rethink has been well received by equity investors, with the share price more than doubling in the week since it was announced. And where DWCP is concerned, analysts believe it may offload offshore property assets to keep its debt down, refocusing on China and securing its coveted A-share listing.

However, as 21CN Business Herald reports, Wang still seems to be moving full steam ahead with plans to set up a fifth major business line alongside commercial property, culture, internet technology and finance. The newspaper says Wanda is establishing a health sector group that will have equal ranking with the existing business lines, but also ponders why the group hasn’t publicly confirmed the move.

To date, it says Wanda has committed Rmb144 billion to its medical investments. In April it signed a Rmb70 billion deal with the Chengdu municipal government to build a healthcare park and it has an ongoing agreement with the UK’s International Hospital Group (IHG) to build hospitals, which IHG will run.

The newspaper is wondering whether Wang’s latest venture will suffer the same fate as the hotel and tourism assets, which required heavy investment but promised lengthy payback periods. “There are no success stories of a property developer transitioning to a healthcare company,” 21CN cautions.

Other news reports suggest the shedding of other overseas assets. The Australian Financial Review reckons Wang is trying to sell Sydney’s Circular Quay apartment and hotel project, worth $ 1 billion, and its Jewel Resort project on the Gold Coast, worth $ 900 million (Wanda says the rumour is unfounded).

Somewhat more concrete: Wanda’s US-based cinema chain AMC will lay off 3,200 staff as it lurches to a second quarter loss forecast at close to $175 million. Investors reacted badly, sending AMC’s share price down 26%.


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