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China's Second-Richest Man Doubles His Money on AMC Entertainment Acquisition

Wang Jianlin Dalian Wanda Chairman H
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Wang Jianlin

Wang Jianlin has seen the value of his controlling stake in North America's second-largest cinema chain soar –- an almost unthinkable result when he bought the company 18 months ago.

China's second-richest man, Wang Jianlin, has seen the value of his controlling stake in AMC Entertainment more than double since he purchased it 18 months ago.

In August 2012, Wang invested about $800 million to acquire 80 percent of AMC -- North America's second largest movie chain -- in a $2.6 billion debt-financed deal. That stake is now worth $1.7 billion at Monday's closing price of $22.47, netting Wang paper gains of $900 million, according to Bloomberg.

Such a result was all but unthinkable back in 2012.

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Wang is chairman of Dalian Wanda Group, China's largest real estate developer, which also owns China's largest cinema chain, Wanda Cinema Line Corp. With AMC and Wanda combined, Wang oversees more movie screens than any businessman on the planet. 

At the time of the AMC-Wanda deal, many analysts speculated that Wang was driven to make the buy more by the desire to announce Wanda's – and China's – rise to global prominence than by near-term business fundamentals. The deal marked the largest-ever buyout of a U.S. company by a Chinese firm.

But most believed there was little room for growth in the U.S. exhibition market, as movie screens per capita had reached a point of saturation and yearly domestic box office had been hovering just above $10 billion (China's box office, meanwhile, was growing in excess of 35 percent each year). Wang himself suggested in interviews that he wasn't particularly concerned about short-term profits.

Gerry Lopez, CEO of Kansas-based AMC, said on an earnings call on Tuesday that the increase in the company's market value since the Wanda buyout was buoyed by a record year for Hollywood films in 2013, improvements in customer service and a rising stock market overall.

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“When the grass is green, the baseball is played better,” he added.

On Monday, AMC posted fourth-quarter net income of $279.6 million and a sales rise of 2.3 percent to $698.1 million. For the year, the company earned $364 million on revenue of $2.7 billion.

Wanda's huge cinema holdings and aggressive expansion in China have also likely given AMC better leverage with technology and cinema amenities suppliers. Wanda has a contract with Imax to build 210 giant-format theaters in China by 2021.

Lopez said on the call that he plans to invest $245 million in each of the next three years to boost the quality of the moviegoing experience at AMC, with new motorized, reclining seats, restaurants and better refreshment options. The company has also been adding some Imax screens.

“Having your 80 percent shareholder with a long-term view, and being involved in not just one segment, but all of the elements of the industry, that’s only good news for shareholders,” Lopez said. "That’s the journey Wanda has helped us with.”

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At age 59, Wang, who came of age in the Chinese military, has a net worth of $13.2 billion, according to the Bloomberg Billionaires Index. 

In September, Wang announced plans to invest $8.2 billion to build China's largest movie studio and entertainment in the northeastern port city of Qingdao. The company flew Leonardo DiCaprio, Nicole Kidman, Harvey Weinstein, Cheryl Boone Isaacs, John Travolta, Catherine Zeta-Jones, Ewan McGregor, Kate Beckinsale and Christoph Waltz to the dusty seaside city to attend the unveiling ceremony.