Dick Clark Productions Owner Calls Off China Sale, Sues for Breakup Fee
Dalian Wanda's struggle to close the $1 billion transaction illustrates the extent of Beijing's clampdown on overseas dealmaking.
Chinese conglomerate Dalian Wanda Group's proposed $1 billion takeover of Dick Clark Productions, the prolific TV production company behind the Golden Globe Awards, is officially dead.
Dick Clark owner Eldridge Industries said Friday in a statement that one of its affiliates "terminated" the deal to sell Dick Clark to Wanda and had sued to recover half of a $50 million "reverse termination fee" connected to the deal.
According to the Eldridge statement, the agreement was scuttled "after Wanda failed to honor its contractual obligations." (Eldridge is the owner of or investor in several entertainment properties, including The Hollywood Reporter.)
Wanda chairman Wang Jianlin, China's richest man, reached a deal to acquire Dick Clark in November. But around the same time, Beijing's regulators began enacting a sweeping new capital-control policy. Concerned that record amounts of outward investment from Chinese firms were contributing to a devaluation of the renminbi — potentially undermining confidence in China's economy — regulators began instituting rigorous oversight of all major overseas transactions.
Media deals derailed, or perilously slowed, include the sale of The Hurt Locker producer Voltage Pictures to Chinese metals manufacturer Anhui Xinke New Materials for $350 million (the deal went bust shortly after it was announced in December). Paramount Pictures also has struggled to collect any part of a $1 billion financing deal with Shanghai Film Group and Huahua Media.
Wanda's struggles to execute the Dick Clark transaction suggest that even China's largest and best connected corporate giants have been hamstrung by the clampdown. After all, the Beijing-based conglomerate has had little trouble getting official clearance to move billions before. Within China, Wang is renowned for the speed and forcefulness with which he pursues his stated targets.
In 2012, the company kicked off its ongoing global expansion with the $2.6 billion takeover of U.S. movie theater chain AMC Entertainment. And last January, Wanda successful paid an eye-popping $3.5 billion for Burbank-based Legendary Entertainment, producer of Godzilla and Pacific Rim (other big-ticket Wanda buys include $500 million for the company behind The Ironman triathlon series, and £320 million for Sunseeker, the British maker of the mega yachts featured in James Bond movies). The meltdown of the Dick Clark agreement marks the first time Wanda has failed to follow through on a major overseas acquisition announcement.
The Eldridge legal move, made in Delaware Chancery Court, seeks to force Wanda to hand over $25 million of a $50 million termination fee that was promised if the deal fell through. The suit, filed by attorneys at New York's Paul Hastings firm and obtained by THR, alleges Wanda originally agreed to consummate the sale by mid-January but paid half the breakup fee to extend the deadline to the end of February. When the deal failed to close by the extended deadline, it then failed to perform its obligation to pay the remainder of the breakup fee, according to the suit.
Under the planned terms of the Wanda takeover, Dick Clark's current leadership of CEO Allen Shapiro and president Michael Mahan were to stay on board via long-term employment agreements, while Eldridge owner Todd Boehly was to become an advisor to Wanda.
In 2012, Guggenheim Partners and others paid $370 million for Dick Clark amid increased demand for television content, especially live events like Dick Clark's American Music Awards and Billboard Music Awards, which are perceived as more "DVR proof" and thus appealing to advertisers. Since that purchase, ratings for live awards shows have remained steady or declined slightly while the overall television landscape has suffered ratings drop-offs. In 2015, Dick Clark's majority ownership was acquired by Boehly's Eldridge Industries.
The Dick Clark deal also would have represented Wanda's first major move into international TV production. In addition to owning China's largest cinema circuit and major domestic production and distribution companies, the conglomerate controls the world's largest overseas theater network, including North America's AMC Entertainment and Carmike Cinemas, Europe's largest chain Odeon/UCI and Hoyts, Australia's second-largest film exhibitor. Wanda also is building the world's largest film production facility in China's eastern port city of Qingdao.
The full statement from Eldridge is below.
“Eldridge Industries announced today that one of its affiliates has terminated its agreement to sell Dick Clark Productions to the Dalian Wanda Group. Wanda had agreed to acquire Dick Clark Productions in November 2016. Eldridge’s affiliate terminated the agreement this week after Wanda failed to honor its contractual obligations. Eldridge’s affiliate also has filed with the Delaware Chancery Court to compel release of the balance of escrowed funds to which it is contractually entitled given Wanda’s failure to consummate the sale.”