How China Ownership Could Impact America's AMC Movie Chain

Wang Jianlin, president of Wanda Group - 2005

The American theatre chain gets a much needed infusion of cash, while the Chinese conglomerate gets experience in film distribution and chain management.

Dalian Wanda Group’s agreement to purchase AMC Entertainment for $2.6 billion creates the largest theater chain in the world and marks China’s biggest acquisition of a U.S. company, therefore it has some industry watchers wondering what the ramifications might be for the movie exhibition industry.

One high-ranking executive said his initial reaction to the May 21 announcement was 100 percent positive, given that AMC’s private-equity owners – Bain Capital, Apollo Global Management, the Carlyle Group and others – had allowed the theater chain to fall into disrepair compared with its competitors. “Even the bulbs weren’t changed, so films looked dim,” he said.

Indeed, Wanda president and chairman Wang Jianlin announced his intentions to invest $500 million in AMC. Observers see installation of bars and restaurants at some locations, as well as upgrades to screens and sound systems, and the improvements could be noticeable enough to encourage disenchanted moviegoers to the give theaters another try.

“It’s been a long time since AMC was run by someone with deep pockets and a timeframe longer than the next quarter,” said the insider, who noted that Regal Entertainment Group, Cinemark Holdings and Carmike Cinemas would be inclined to match AMC’s upgrades.

Wanda, a private company with real estate, department stores and hotels that generates nearly $17 billion in annual revenue, has 86 theaters with 730 screens in China, while AMC has 346 theaters and 5,034 screens primarily in North America. The companies said AMC will be run by its existing team of executives, led by CEO Gerry Lopez, while its headquarters will remain in Kansas City. AMC employs 18,500 people and the transaction isn’t expected to impact headcount.

The Wanda-AMC transaction is the latest involving China’s embrace of Hollywood and vice-versa. With a population of 1.3 billion, the market is enormous, but Chinese officials only allow about 34 foreign films into the country each year, which has the major film studios jockeying for favorable treatment. Disney/Marvel, for example, said Iron Man 3 will be coproduced in China with DMG Entertainment while DreamWorks Animation has formed Oriental DreamWorks with three Chinese partners and News Corp. has invested in Beijing-based Bona Film Group.

How, or if, the Wanda-AMC transaction impacts these and other initiatives remains to be seen, but Jianlin has also disclosed that Wanda applied for a license to import movies into China, which only two other entities now hold, and he told reporters that he’d like to acquire a European exhibitor next.

Some say it’s wise not to read too much into Wanda’s acquisition of AMC.  It’s simply expanding worldwide, not only in movie exhibition but in other areas, as well.

“Wanda’s parent company is – among other things – a large real estate developer, and the purchase of AMC gives them a window into the US market,” the film exhibition executive said.  “Wanda has aspirations to be the largest exhibitor in the world, and this acquisition puts them closer to realizing this goal.”

“I don’t see a lot of crossover meaning for the industry as AMC has been available to be purchased for a while and there was no bidding war,” added Steve Birenberg of Northlake Capital Management.

“Wanda probably just sees a growth opportunity in film and a good cash-on-cash investment,” said Birenberg. “Add in Wanda getting some expertise in distribution, theater construction and theater management for a big opportunity to expand Chinese theaters and screens, and I think Wanda probably just sees it as a decent investment with a Chinese-growth kicker.”