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| China’s Wanda Signals Retreat in Debt-Fueled Acquisition Binge | China’s Wanda Signals Retreat in Debt-Fueled Acquisition Binge |
| (about 5 hours later) | |
| BEIJING — A year ago, the Chinese billionaire Wang Jianlin declared the dominance of his vast entertainment empire, Dalian Wanda Group, boasting that his theme parks were a “pack of wolves” that would defeat the lone “tiger” of Disney’s Shanghai resort. | BEIJING — A year ago, the Chinese billionaire Wang Jianlin declared the dominance of his vast entertainment empire, Dalian Wanda Group, boasting that his theme parks were a “pack of wolves” that would defeat the lone “tiger” of Disney’s Shanghai resort. |
| Now, Mr. Wang is retreating, in a sign that Wanda could be reaching the limits of its debt-fueled expansion. | Now, Mr. Wang is retreating, in a sign that Wanda could be reaching the limits of its debt-fueled expansion. |
| Wanda said on Monday that it would sell the theme parks as part of a $9.3 billion deal that includes 76 hotels and a major chunk of 13 tourism projects. The cash from the deal, with the property developer Sunac China, would be used to pay down debt. | Wanda said on Monday that it would sell the theme parks as part of a $9.3 billion deal that includes 76 hotels and a major chunk of 13 tourism projects. The cash from the deal, with the property developer Sunac China, would be used to pay down debt. |
| Wanda appears to be caught in a political and financial downdraft that has hit many big Chinese deal makers. For years, the Chinese government encouraged the global ambitions of corporate giants like Wanda. Mr. Wang muscled into Hollywood’s domain, buying the AMC Theaters chain and the struggling production company Legendary Entertainment. | Wanda appears to be caught in a political and financial downdraft that has hit many big Chinese deal makers. For years, the Chinese government encouraged the global ambitions of corporate giants like Wanda. Mr. Wang muscled into Hollywood’s domain, buying the AMC Theaters chain and the struggling production company Legendary Entertainment. |
| Wanda battled Disney with plans for 13 theme parks across China. When Disney opened its Shanghai resort last year, drawing enormous crowds, Mr. Wang declared that “the frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed.” | Wanda battled Disney with plans for 13 theme parks across China. When Disney opened its Shanghai resort last year, drawing enormous crowds, Mr. Wang declared that “the frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed.” |
| Such aggressive expansion plans are now under increased scrutiny in Beijing. Last month, a senior Chinese banking official warned that some of China’s largest and most indebted companies may pose a systemic risk to the country’s banks and to the health of the broader economy. | Such aggressive expansion plans are now under increased scrutiny in Beijing. Last month, a senior Chinese banking official warned that some of China’s largest and most indebted companies may pose a systemic risk to the country’s banks and to the health of the broader economy. |
| The deal-making ambitions have also been tempered by a backlash overseas, as politicians and policy makers express concerns over China’s influence. American lawmakers are pushing for regulators to keep a closer watch over money flowing into the United States from China. | The deal-making ambitions have also been tempered by a backlash overseas, as politicians and policy makers express concerns over China’s influence. American lawmakers are pushing for regulators to keep a closer watch over money flowing into the United States from China. |
| The combination of forces at home and abroad has put global deal makers on the defensive. | The combination of forces at home and abroad has put global deal makers on the defensive. |
| Last month, the Chinese government detained Wu Xiaohui, the chairman of the Anbang Insurance Group, for undisclosed reasons. Anbang, with multibillion-dollar deals for properties like the Waldorf Astoria hotel in New York, tested regulatory limits in China and drew political censure in the United States. | Last month, the Chinese government detained Wu Xiaohui, the chairman of the Anbang Insurance Group, for undisclosed reasons. Anbang, with multibillion-dollar deals for properties like the Waldorf Astoria hotel in New York, tested regulatory limits in China and drew political censure in the United States. |
| HNA Group, a Chinese conglomerate with stakes in Deutsche Bank, Hilton Hotels and Ingram Micro, has been criticized for its opaque ownership structure. Last week, shares in Fosun International slid on speculation that the company had lost contact with its chairman, Guo Guangchang, who is often called the Warren E. Buffett of China. Fosun called the speculation “malicious rumors,” saying that everything was normal. | HNA Group, a Chinese conglomerate with stakes in Deutsche Bank, Hilton Hotels and Ingram Micro, has been criticized for its opaque ownership structure. Last week, shares in Fosun International slid on speculation that the company had lost contact with its chairman, Guo Guangchang, who is often called the Warren E. Buffett of China. Fosun called the speculation “malicious rumors,” saying that everything was normal. |
| Wanda has not been immune to the pressure. | Wanda has not been immune to the pressure. |
| American lawmakers are concerned that Wanda’s Hollywood ambitions are part of a broader play by the Communist Party in Beijing to control how China is portrayed. This year, Wanda’s $1 billion deal to buy Dick Clark Productions fell apart for unknown reasons. | American lawmakers are concerned that Wanda’s Hollywood ambitions are part of a broader play by the Communist Party in Beijing to control how China is portrayed. This year, Wanda’s $1 billion deal to buy Dick Clark Productions fell apart for unknown reasons. |
| Investors’ confidence has been shaken. | Investors’ confidence has been shaken. |
| Shares of Wanda Film, a unit listed in the Southern Chinese city of Shenzhen, have fallen about 11 percent in the last month. In December, Standard & Poor’s downgraded the long-term corporate credit rating for Dalian Wanda Commercial Properties and Wanda Commercial Properties, both listed in Hong Kong, citing high leverage and capital expenditures. | Shares of Wanda Film, a unit listed in the Southern Chinese city of Shenzhen, have fallen about 11 percent in the last month. In December, Standard & Poor’s downgraded the long-term corporate credit rating for Dalian Wanda Commercial Properties and Wanda Commercial Properties, both listed in Hong Kong, citing high leverage and capital expenditures. |
| The deal announced on Monday would help Wanda pay off some of its debt. | The deal announced on Monday would help Wanda pay off some of its debt. |
| Sunac would pay $4.4 billion for a 91 percent stake in each of the 13 tourism projects, all in China, and would take over the loans for the projects. Wanda also agreed to sell 76 hotels for $4.9 billion. | Sunac would pay $4.4 billion for a 91 percent stake in each of the 13 tourism projects, all in China, and would take over the loans for the projects. Wanda also agreed to sell 76 hotels for $4.9 billion. |
| “Through the sale of these assets, Wanda Commercial’s debt-to-asset ratio will drop dramatically,” Mr. Wang, the Wanda chairman, told the Chinese business weekly Caixin. “All the cash will go to repaying loans.” | “Through the sale of these assets, Wanda Commercial’s debt-to-asset ratio will drop dramatically,” Mr. Wang, the Wanda chairman, told the Chinese business weekly Caixin. “All the cash will go to repaying loans.” |
| The move also plays into a broader shift by Wanda in recent years, to a so-called asset-light strategy that could free up more capital. Under this model, Wanda is looking to own fewer properties outright and to collect more money from management fees and other services. | The move also plays into a broader shift by Wanda in recent years, to a so-called asset-light strategy that could free up more capital. Under this model, Wanda is looking to own fewer properties outright and to collect more money from management fees and other services. |
| In the deal with Sunac, Wanda would continue to operate all of the projects under the company’s brand name, and it would own fewer underperforming hotels. | In the deal with Sunac, Wanda would continue to operate all of the projects under the company’s brand name, and it would own fewer underperforming hotels. |
| “Wanda is selling the noncore part of its cultural tourism business,” said Deng Haozhi, a real estate economist with Fineland Assets Management Company based in Guangzhou, China. “Ultimately, what they are selling are properties that the market doesn’t like.” | |
| Even so, the deal amounts to an about-face for Wanda. The company had made tourism central to its focus, looking to capitalize on China’s growing middle class. | Even so, the deal amounts to an about-face for Wanda. The company had made tourism central to its focus, looking to capitalize on China’s growing middle class. |
| But Wanda’s record with theme parks has been mixed: Only four of the 13 theme parks being sold are up and running; most are in the planning stages. Wanda opened its first theme park, an indoor one, in the Chinese city of Wuhan. But it closed after 19 months for “upgrades and renovations,” and it has yet to reopen. | But Wanda’s record with theme parks has been mixed: Only four of the 13 theme parks being sold are up and running; most are in the planning stages. Wanda opened its first theme park, an indoor one, in the Chinese city of Wuhan. But it closed after 19 months for “upgrades and renovations,” and it has yet to reopen. |
| For the first half of this year, Wanda said its cultural segment, of which tourism is a component, rose 5.9 percent from a year earlier, to $4.5 billion. | For the first half of this year, Wanda said its cultural segment, of which tourism is a component, rose 5.9 percent from a year earlier, to $4.5 billion. |
| “Given all the talk about how this was the centerpiece of the strategy for moving away from more traditional commercial real estate, it’s hard not to see it, to some degree, as a form of capitulation,” said Ronald Merriman, managing director of planning and advisory services for Pro Fun Management Group, a firm based in California that provides management services for theme parks and that has advised Wanda. | “Given all the talk about how this was the centerpiece of the strategy for moving away from more traditional commercial real estate, it’s hard not to see it, to some degree, as a form of capitulation,” said Ronald Merriman, managing director of planning and advisory services for Pro Fun Management Group, a firm based in California that provides management services for theme parks and that has advised Wanda. |
| Mr. Merriman said Sunac had paid a steep price for “what are a handful of good but not stellar performers.” | Mr. Merriman said Sunac had paid a steep price for “what are a handful of good but not stellar performers.” |
| Sunac, too, faces skepticism over its deal making. Last week, its shares fell amid investor fears that it would take a loss from its $2.2 billion investment in the beleaguered LeEco Group, which is struggling to repay creditors. | Sunac, too, faces skepticism over its deal making. Last week, its shares fell amid investor fears that it would take a loss from its $2.2 billion investment in the beleaguered LeEco Group, which is struggling to repay creditors. |
| “I don’t understand this move by Sunac,” Mr. Deng said. “Where are they getting this endless flow of money?” | “I don’t understand this move by Sunac,” Mr. Deng said. “Where are they getting this endless flow of money?” |
| “Last year, they were the property developer that bought the most number of properties,” he added. “And this year, they’ve spent a lot of money to save LeEco.” | “Last year, they were the property developer that bought the most number of properties,” he added. “And this year, they’ve spent a lot of money to save LeEco.” |