Last resort

Wanda sells to Sunac in theme park exit


Wang: the Disney dream is over

“Disney really shouldn’t have come to China,” Wang Jianlin declared in May 2016. At the time, the Wanda boss had just unveiled an ambitious plan for resort development and predicted that Wanda’s theme parks would soon overpower Shanghai Disneyland.

Two years on, Wanda has sold the final two of its tourism properties to developer Sunac for Rmb6.3 billion ($902 million). It follows a deal in 2017 that saw Wanda sell a 91% stake in 13 of its culture and tourism projects to the same buyer for Rmb43.8 billion.

“What it means for Wang Jianlin is that his dream of Wanda defeating Disney is over. It also symbolises that his era in China’s real estate industry has ended,” concluded Tencent Finance, a portal, highlighting that the combined sales to Sunac, totalling Rmb50 billion, were the biggest real estate transaction ever in China.

Industry observers say the conglomerate is still tight for cash despite a slew of asset disposals over the past two years.

According to Reuters, Wanda is also exploring a partial sale of Hollywood studio Legendary Entertainment, which it bought in 2016 for $3.5 billion.

Two years ago Wanda was planning to inject some of Legendary Entertainment’s assets into its Shenzhen-listed unit Wanda Film. But the restructuring plan was held up by Chinese regulators. Trading in Wanda Film finally resumed this week – following a 488-day suspension – but its share price has plunged the 10% daily limit for three consecutive sessions, wiping out more than Rmb15 billion in market value.

“Wanda hasn’t come out of last year’s pain,” an insider told Tencent Finance. “The overall economic outlook in China is dire; the housing market is in a downturn; Wanda’s ability to raise external financing has been slow. So it needs to urgently sell the tourism business to reduce expenses and replenish cashflow.”

The latest sale is also part of Wang’s mission to work his way back into the good graces of the central government. After a period of aggressive overseas buying, Chinese authorities have put pressure on private companies to pare back their assets and deleverage. Wang has watched business peers like Wu Xiaohui, former boss of the acquisitive Anbang Group, receive lengthy prison sentences. Tellingly Wang was left off a key list of China’s top 100 entrepreneurs that was compiled by the state-backed All-China Federation of Industry and Commerce last month (see WiC430).

The property deal with Sunac may seem straightforward, but Wang needed to reassure local governments that Sunac, which makes the majority of its revenue from selling residential properties, is capable of developing such large-scale tourism projects.

“Wanda will still need to work with local governments to ensure a smooth transition,” Jiemian, a news portal, wrote.

Prior to signing the deal with Sunac, Wang personally travelled to Jinan, where a ‘Wanda City’ is still under construction, to get the government to bless the deal. The local authorities demanded that Wanda sign a supplementary agreement to deliver the project on time, meet quality standards and put together a comprehensive plan for how it would be operated on completion.

The worry is not unfounded. A ‘Wanda City’ – which typically includes a theme park, a stage show, shopping malls and commercial office buildings – can span as much as three million square metres. Developing such a large-scale project is highly capital-intensive. Another ‘Wanda City’ in Wuhan, for instance, required Rmb50 billion in investment.

Sunac’s boss Sun Hongbin has built up a reputation for scooping up quality assets on the cheap. Now he has to prove that his company is capable of developing these mega projects as well. Meanwhile, Sunac’s buying spree has continued apace. Last month it was revealed that it has been snapping up shares in Chongqing-based developer Jinke in the secondary market. Sunac now controls as much as 27.67% – up from just 17% two years ago. Reports are that a hostile takeover could be on the way.

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