The blockbuster announcement of Dalian Wanda’s $3.5 billion cash acquisition of Legendary Entertainment was billed as the “largest cross-border cultural acquisition to date” between China and the U.S. It also marks a striking watershed for Legendary founder and CEO Thomas Tull, who always previously appeared to be master of his own universe, despite substantial slate deals with big American studios.
Tull told reporters that he jumped at the merger, and being absorbed into the Chinese conglomerate, as an opportunity to build an entirely new international company. He and his new partners, while making clear Tull will continue to lead Legendary, declined to detail his stake in the newly formed partnership created by the merger. A lawyer who worked on the deal said only that Tull would “have a significant incentive tied back to the performance of the company.”
Tull appealed to the media to have patience in letting the new alliance congeal, adding that details would emerge “in the coming days and months.”
"This is brand new,” Tull said. “This has never happened before. There is no road map for this.” Wanda Group Chairman Wang Jianlin had echoed those thoughts in an earlier statement, saying the transaction would turn Wanda Film Holdings Co. into “the highest revenue-generating film company in the world.”
During the brief Q&A with American reporters, Tull stressed that the company he created more than a decade ago “will continue on and to be front and center and to be bolstered by Wanda.” He added that he would have “a meaningful rooting stake in making sure the company is successful and we will elaborate more in the future.”
Jack Gao, head of Wanda Film Holdings Co., also sounded a vote of confidence for Tull, saying that the Legendary boss will remain “very central and very important in the overall Legendary in the future,” adding: “We will support him by all means. He is the one to run the show.”
More specifically, Tull said he and Legendary’s leadership would continue to lead day-to-day operations and to have responsibility for green-lighting film projects. He added that “it would behoove us to take advantage of the vast resources Wanda has especially in China….with direct access to consumers [and] theater chains. Those are some of the things I will be more focused on” from the partnership, going forward.
A Tull confidante previously had said that it was important for Tull to gain the financial and strategic partnership with the Chinese concern and the rapidly-growing Chinese market, while maintaining his leadership role with Legendary. The confidante said Tull felt the deal accomplished that.
The Wanda investment helps Legendary further defray the risk inherent to the sort of high-budget fantasy and hero pictures that the company specializes in. Legendary lost tens of millions of dollars on its October release “Crimson Peak,” which it self-funded, while Universal handled marketing and distribution. Other setbacks came with “Seventh Son,” triggering an $85 million write-down in 2013 and this year’s “Black Hat,” the thriller that took in just $18 million on a production budget of $70 million.
Tull said he did not expect any immediate impact on the kind of films Legendary would produce, noting that the company is already making the big-budget “The Great Wall” and other films. He said: “Our films have done well in China and connected with Chinese audiences before.”
Legendary has been luckier with its co-financing arrangements, most recently with Universal. A particular bright spot last year came with its 25% investment in “Jurassic World,” which collected $1.7 billion in receipts worldwide. Legendary also fared nicely with its share of “Straight Outta Compton,” which took in more than $200 million worldwide on a modest $28 million production budget.
While other companies have made noise about deals with Chinese firms, then failed to close them, Legendary has sealed a number of the pacts. The Chinese exhibitor Golden Harvest bought and then quickly sold a small minority stake (3.33%) at a small profit. Legendary also got China’s Tencent Pictures to take an equity stake in the American company’s "Warcraft,” based on the video game “World of Warcraft.” It is set to debut June 10.
The company also started a Legendary East subsidiary to enhance production in China. The subsidiary is in post-production on the $150 million “The Great Wall,” from acclaimed Chinese director Zhang Yimou. It’s pegged for a November 23 release.