2017-07-10 10:11:02
China’s Wanda Signals Retreat on Debt-Fueled Acquisition Binge

BEIJING — The Chinese conglomerate Dalian Wanda Group has epitomized the country’s high-flying deal makers, building a vast global empire of theme parks, real estate developments and movie theaters across the United States.

Now, Wanda is signaling a strategic retreat, as Chinese companies increasingly face pressure for their debt-fueled acquisition binges.

Wanda said on Monday that it would sell 76 hotels and a major chunk of 13 tourism projects to the property developer Sunac China for $9.3 billion. The cash from the deal will be used to repay loans.

It is an especially marked turnabout for Wanda and its billionaire owner, Wang Jianlin.

When Disney opened its Shanghai resort last year to enormous crowds, Mr. Wang crowed about his own theme parks, declaring that “the frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed.” Wanda’s theme parks are to be sold as part of the deal, although the conglomerate would still be involved in running the operations.

Wanda became one of China’s biggest global deal makers as it sought to expand its entertainment division. It owns the AMC Theaters chain in the United States and bought the struggling production company Legendary Entertainment.

Those acquisitions have prompted scrutiny, both at home and abroad.

American lawmakers are concerned that Wanda’s Hollywood ambitions are part of a broader play by the Communist Party in Beijing to control how China is portrayed. More broadly, politicians in Washington, citing Dalian’s deals, are pushing for increased review of such deals for national security reasons.

In China, officials are worried that highly indebted companies like Wanda pose a broader threat to the financial system. Last month, a senior Chinese banking official warned that some of the country’s largest companies could represent a systemic risk to the nation’s banks.

Shares of Wanda and other big Chinese deal makers have been shaken by the increasingly public debt troubles.

Shares of Wanda Film, a unit of Wanda listed in the southern Chinese city of Shenzhen, have fallen about 11 percent in the past month. Last week, shares of Sunac plunged amid investor fears that it would take a loss from its $2.2 billion investment in the beleaguered LeEco Group, which is struggling to repay creditors.

Looking to capitalize on rising domestic tourism, Sunac, based in the northern city of Tianjin, would pay $4.4 billion for a 91 percent stake in each of the 13 tourism projects, all in China. Wanda also agreed to sell 76 hotels for $4.9 billion.

The deal means Sunac would also take over the loans for the projects, Wanda said on its website. Wanda, based in Beijing, will continue to operate all the projects under the company’s brand name. The two companies plan to sign a detailed agreement by the end of this month.

“Through the sale of these assets, Wanda Group’s debt to asset ratio will drop dramatically,” Mr. Wang, one of China’s wealthiest men, told the local business weekly Caixin.