Chinese Firm to be a Giant of Cinema

CHINA'S Dalian Wanda Group has agreed to buy AMC Entertainment Holdings, the second-largest cinema chain in the United States, for US$2.6 billion, Wanda said yesterday.

The Beijing-based company is to invest an additional US$500 million to fund AMC's development.

AMC's management team will stay on after the merger, said Wang Jianlin, Wanda's chairman and president.

"We support AMC becoming bigger, not only in the United States but in the global market," Wang said at a signing ceremony for the acquisition.

He pledged to implement an incentive plan to boost AMC's profitability, and to create more value for shareholders, customers and employees of the US operation.

The two companies started talks about a deal in 2010.

The acquisition was approved by China's National Development and Reform Commission in March this year. However, the transaction is still subject to approval by the US government, Wanda said.

AMC has reported losses for the past three years but its CEO, Gerry Lopez, said it returned to profit this year due to strong ticket sales, the Associated Press reported.

Wang said AMC's financial problems were due to the cost of servicing debt. He said conditions should improve once an injection of Wanda's cash allows it to pay off some of that.

"We are confident that after the merger, AMC will turn positive," he said. "We have absolute confidence in the future of the company."

Wang said Wanda had applied to the Chinese government for a license to import movies, a right held now by two state-owned companies. But he said the AMC acquisition concerned only film exhibition, not production or distribution.

Wanda Group, based in Dalian in northeast China, is a conglomerate involved in commercial property, hotels, tourism, culture and chain department stores. It is also China's biggest cinema operator with 86 cinemas and 730 screens.

The deal will give it access to AMC's 346 cinemas and more than 5,000 screens.

After the acquisition is complete, Wanda will become the world's largest cinema chain.

"It's the biggest acquisition case made by a Chinese private firm in the US. It's also the biggest overseas merger of China's cultural industry," Wang said. "Wanda plans more future mergers with big European and American theater chains. We target to reach 20 percent share of the global film market by 2020."

China's box office sales reached US$2 billion in 2011, making it the third-largest market after the US and Japan, according to the Motion Picture Association of America. Last year, the association said that China was the main driver of Asia Pacific box office growth, but remained a restricted market for foreign films.

Ties between movie industries in China and the US strengthened in February, when a landmark agreement significantly increased the number of US movies allowed in Chinese cinemas. In the same month, DreamWorks Animation said it will create Oriental DreamWorks, a Shanghai-based production studio.

Walt Disney Co has said its next "Iron Man" movie will be co-produced with a Chinese partner and "Chinese elements" will be added to the story to increase its local appeal.

Wanda is making a strategic investment in preparation for going public, said Gao Shouzhi, president of EntGroup, a Chinese film industry research firm.

Market watchers say the acquisition will help the cinema line obtain a better pricing for its debut if approved.

Wanda Cinema Line Co, a unit of Wanda Group, filed for an IPO in February, according to a list on the China Securities Regulatory Commission website.

The AMC deal is the third-largest Chinese corporate investment in the US, according to financial research firm Dealogic, after investments by China's sovereign wealth fund, the China Investment Corp, of US$5 billion in Morgan Stanley and US$3 billion in Blackstone Group LP in 2007.