China's Wanda Retreats From Theme Park Business With $9.3 Billion Deal

Wang Jianlin China Brand Summit GETTY H 2016
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Just last year, the company's billionaire chairman Wang Jianlin boasted that his "wolf pack" of theme parks would drive the Walt Disney Co. out of China.

Dalian Wanda Group, led by Chinese billionaire Wang Jianlin, says it has reached a landmark deal to sell its theme park business to Sunac China for $9.3 billion.

The agreement — which is said to be the second-biggest real estate transaction ever in China — signals a major deescalation of Wanda's once mighty ambitions in the theme park sector. Wang, one of China's most prominent businessmen, announced plans just last year to build at least 20 major location-based tourism projects across the Middle Kingdom. At the time, he also boasted that his "wolf pack" of theme parks would drive the Walt Disney Co.'s "lone tiger" — Shanghai Disneyland — out of the country.

Under the terms of the deal with Sunac, Wanda is selling a 91 percent stake in nearly all of its current and planned tourism projects, including three recently launched theme parks, and 72 of its 102 hotels in China. 

The deal is understood to be part of Wanda's drive to cut its massive debt load and bolster its case with Beijing regulators for an IPO. The conglomerate pulled its core property unit off of the Hong Kong stock exchange last year, with plans to relist in mainland China, where valuations are among the world's highest.

Wanda said Sunac will take over responsibility for the tourism projects' loans and financing, while Wanda will continue to design, build and manage the resorts under its own brand name. 

Wanda did not officially state a reason for the sale, but in an interview with Chinese business outlet Caixin, Wang said the deal would substantially reduce Wanda's debt and move the company closer to the "asset-light" model he has been publicly espousing for some time. 

"Through this asset transfer, Wanda Commercial's debt ratio will be greatly reduced, all the proceeds will be used to repay loans. Wanda Commercial plans to repay most of the bank loans this year," Wang told Caixin

Best known in China as a real estate developer, Wanda began building theme parks a few years ago as part of an aggressive diversification into what China calls the "culture industry," comprising the entertainment, sports and tourism sectors. Believing the high-growth era for the country's real estate industry to be in its twilight, Wang has tried to pivot his conglomerate to capitalize on the Chinese government's efforts to transition the country towards a consumer-led economy. Wang also sought to establish his conglomerate as one of the leading flag-bearers for China Inc. overseas.

The twin endeavors have entailed acquiring domestic and international cinema chains — such as North America's largest, AMC Entertainment — and an array of overseas sports and leisure assets, such as British yacht-maker Sunseeker, the company behind the Iron Man triathlon races, and U.S. movie studio Legendary Entertainment. 

The theme park sell-off could be viewed as Wanda's response to the Chinese government's mounting concerns over the level of red ink coursing through the national economy — particularly the systemic threats posed by the recent, debt-fueled buying sprees of China's large conglomerates. Last month, the China Central Banking Commission instructed state banks to assess their exposure to the debt raised by several local giants, including Wanda, to finance overseas acquisitions. 

The deal with Sunac also may be a tacit admission of just how much Wanda has struggled to devise a winning formula in the complex theme parks business. The company's first major attraction, Wanda Movie Park Wuhan, opened in central China in late 2014 and closed within months after early admission numbers plummeted. Wanda said the park was shutting down temporarily for upgrades, but it has yet to reopen. The company's major theme park development in Nanchang — which Wang talked up on state television last year while publicly dismissing Disney's Chinese theme park ambitions — reported attendance of approximately 1.3 million in its first seven months. Shanghai Disneyland, meanwhile, hit 11 million visitors in its first full year. 

Sunac is one of China's largest real estate developers, based in the Eastern Chinese city of Tianjin. The company is led by Sun Hongbin, whose net worth Forbes estimates to be $2 billion. Sunac has become an increasingly visible dealmaker. Earlier this year, it threw a lifeline to Beijing-based LeEco Holdings, investing $2.2 billion in the troubled tech and entertainment company

Wanda says the $9.3 billion deal with Sunac will be finalized in a detailed agreement later this month.