Say What, Wanda? The Fuzzy Math Behind the $3.5B Legendary Purchase

Illustration by Guy Shield

The Chinese conglomerate is trying to pump up the studio's image by highlighting films like 'King Kong,' but will Chinese investors snap up stock in a public offering?

This story first appeared in the April 1 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

With the hiring of Mary Parent as vice chair of worldwide production at Legendary Entertainment, China's Dalian Wanda Group has added some steak to the sizzle of the company it acquired in January for $3.5 billion. Or at least that's the number widely reported. Like much about the deal, the reality of that figure is far from clear.

What does seem clear is that Wanda bought out such other Legendary investors as Japan's SoftBank for a big number, but many Hollywood insiders with ties to China believe it doesn't matter if the price was high because Wanda expects to make an even bigger amount when it sells a company revolving around Legendary to the public. Wanda revealed March 14 that it will fold Thomas Tull's U.S. production-finance outfit and Wanda Pictures into its exhibition unit Wanda Cinema Line, which already has a stock listing on the Shenzhen stock exchange.

Industry skeptics say Parent adds substance to a concoction of uncertain nutritional value, but not enough to alter their perception of Wanda's intentions. "There are entities created because there are parties who will buy the stock," says one. "Do I think this is going to be a big studio pumping out movies? No."

When the Legendary acquisition was announced with a splash, Wanda's billionaire founder Wang Jianlin described his vision of creating a global entertainment company. Wanda then promptly set out to raise $1.5 billion in China for Wanda Pictures, valuing that company at a hefty $5.3 billion. As The Wall Street Journal reported, a document prepared in connection with that offering says Legendary was expected to contribute 73 per­cent of earnings and 80 percent of total revenue of Wanda Pictures. Investors who bought in were promised their shares would be bought back with 15 percent interest if Wanda Pictures had not gone public within a year. (Chinese real estate firm Oceanwide Holdings has disclosed an investment of $163 million.)

Given Legendary's mixed track record at the box office, those projections strike several industry insiders as overly optimistic. Given a real chance, Parent could improve the company's performance. But for now, skeptics think her primary purpose may be to improve optics as Wanda attempts to execute a stock listing for Legendary. One executive with a long history in China anticipates that as Wanda sells shares, Parent's "name will be everywhere, including every movie she's even breathed on." (Parent declined comment, as did Legendary and Wanda.)

Parent, 48, is the former co-president of Universal Pictures and co-CEO of MGM as well as the producer of ambitious projects from auteur filmmakers. One of Wanda's selling points could be that she is the Oscar-nominated producer of Alejandro G. Inarritu's The Revenant, which was over budget and in a world of trouble until she was hired midproduction. "Mary was a lifesaver at a time in the process when we absolutely needed her skill set," says New Regency Productions chief Brad Weston. "I needed someone who could work with the biggest talent in the world and who would do what was best for the movie."

Parent also guided Darren Aronofsky's Noah to success despite tensions between the filmmaker and Paramount; the movie grossed $363 million worldwide. "It sounds canned, but she is a superlative, all-around great executive," says Fox film co-chair Stacey Snider, who was Parent's boss at Universal. "She can source and develop material, she's got great taste, she understands the nuts and bolts of production and is able to put these movies on her back and drive them into the end zone."

Legendary founder Tull, 46, has been focused on making big-budget movies, but he could use help making them profitable. He's been successful in his role as a financier of other people's movies, such as Warner Bros.' The Dark Knight or Universal's Jurassic World. Tull has been accused in Hollywood of overstating his role in making those films, and Wanda is likely to work from the same script, selling Wanda Pictures to the public as if it owned those movies outright.

But several of Legendary's own films, including 2015's Blackhat, Seventh Son and Crimson Peak, all failed for distributor Universal, leading to enormous losses. It happens that Parent produced the only major Legendary-made film that really worked (Godzilla grossed $529 million in 2014) and the only other one that sort of worked (Pacific Rim made $411 million). She is producing Legendary's Kong: Skull Island, which is meant to launch three monster movies by Warners that will include a film pitting Godzilla against the ape.

Having Parent on board could help smooth over any problems with Legendary's next big-budget release, Warcraft, set to open in June. Many in the industry have doubts about the video-game-based film. But if it fails, Wanda can say it was made by previous management. Some observers think Legendary pushed another high-priced movie, Matt Damon's The Great Wall, from November into 2017 to delay more possible bad news.

Going forward, sources say Tull will continue to run Legendary as a unit within Wanda Pictures, along with Parent. Their boss is Jack Gao, a former Microsoft executive who now oversees Wanda's film operations. (Wanda separately owns the AMC cinema chain.) Having a boss is a new experience for Tull, note several observers.

Legendary says Parent also will run its TV division, tak­ing over for Bruce Rosenblum. Recent projects include USA's Colony (co-produced with Universal) and Netflix's series Love. How vibrant that business will be remains to be seen since it is acknowledged that the Chinese are interested in film but not TV. Shuttering the TV operation would require Legendary to write down any losses.

Despite doubts in Hollywood about Wanda's intentions for Legendary, Noble Coker — a former Hong Kong Disneyland exec who worked for Wanda for two years ending in June — says the deal may be about more than raising cash. Coker, who now teaches at USC, says with Wanda, "money is always at the forefront, but legitimacy, reputation, the learning process, integration with U.S. culture and U.S. organizations are also part of the picture." Even if Wanda Pictures were to fail, he adds, the attempt still brings prestige to Wanda "because you're the Chinese company that's trying to expand the influence of China around the world." And confidence in Wang runs so high among the Chinese public that Coker thinks a stock offering could succeed even in an increasingly difficult economy.

"A lot of people in China believe if he puts something up there, it's going to make money," says Coker. "If anyone can do it, he'll be able to do it. And if he can't, they'll say, 'We lost the money but look at what we learned from it. Wait a couple of years and try again.' "

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