Business & Tech

China’s Dalian Wanda, a Disney rival, will sell assets to pay debts

The entertainment empire Dalian Wanda Group runs theme parks like this one in Harbin in northeastern China.

European Pressphoto Agency

The entertainment empire Dalian Wanda Group runs theme parks like this one in Harbin in northeastern China.

BEIJING — A year ago, Chinese billionaire Wang Jianlin declared the dominance of his vast entertainment empire, Dalian Wanda Group, boasting that his theme parks were a “pack of wolves” that would defeat the lone “tiger” of Disney’s Shanghai resort.

Now, Wang is retreating, in a sign that Wanda could be reaching the limits of its debt-fueled expansion.

Advertisement

Wanda said Monday that it would sell the theme parks as part of a $9.3 billion deal that includes 76 hotels and a major chunk of 13 tourism projects. The cash from the deal, with the property developer Sunac China, would be used to pay down debt.

Wanda appears to be caught in a political and financial downdraft that has hit many big Chinese dealmakers. For years, the Chinese government encouraged the global ambitions of corporate giants like Wanda. Wang muscled into Hollywood’s domain, buying the AMC Theaters chain and the struggling production company Legendary Entertainment.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

Wanda battled Disney with plans for 13 theme parks across China. When Disney opened its Shanghai resort last year, drawing enormous crowds, Wang declared that “the frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed.”

Such aggressive expansion plans are now under increased scrutiny in Beijing. Last month, a senior Chinese banking official warned that some of China’s largest and most indebted companies may pose a systemic risk to the country’s banks and to the health of the broader economy.

The dealmaking ambitions have also been tempered by a backlash overseas, as politicians and policy makers express concerns about China’s influence. US lawmakers are pushing for regulators to keep a closer watch over money flowing into the United States from China.

Advertisement

The combination of forces at home and abroad has put global dealmakers on the defensive.

Last month, the Chinese government detained Wu Xiaohui, chairman of Anbang Insurance Group, for undisclosed reasons. Anbang, with multibillion-dollar deals for properties like the Waldorf Astoria hotel in New York, tested regulatory limits in China and drew political censure in the United States.

HNA Group, a Chinese conglomerate with stakes in Deutsche Bank, Hilton Hotels, and Ingram Micro, has been criticized for its opaque ownership structure. Last week, shares in Fosun International slid on speculation the company had lost contact with its chairman, Guo Guangchang, who is often called the Warren E. Buffett of China. Fosun called the speculation “malicious rumors,” saying that everything was normal.

Wanda has not been immune to the pressure.

US 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. This year, Wanda’s $1 billion deal to buy Dick Clark Productions fell apart for undisclosed reasons.

Investors’ confidence has been shaken.

Shares of Wanda Film, a unit listed in the Southern Chinese city of Shenzhen, have fallen about 11 percent in the past month. In December, Standard & Poor’s downgraded the long-term corporate credit rating for Dalian Wanda Commercial Properties and Wanda Commercial Properties, both listed in Hong Kong, citing high leverage and capital expenditures.

The deal announced Monday would help Wanda pay off some of its debt.

Sunac would pay $4.4 billion for a 91 percent stake in each of the 13 tourism projects, all in China, and would take over the loans for the projects. Wanda also agreed to sell 76 hotels for $4.9 billion.

“Through the sale of these assets, Wanda Commercial’s debt-to-asset ratio will drop dramatically,” Wang, the Wanda chairman, told the Chinese business weekly Caixin. “All the cash will go to repaying loans.”

The move also plays into a broader shift by Wanda in recent years, to a so-called asset-light strategy that could free up more capital. Under this model, Wanda is looking to own fewer properties outright and to collect more money from management fees and other services.

In the deal with Sunac, Wanda would continue to operate all of the projects under the company’s brand name, and it would own fewer underperforming hotels.

“Wanda is selling the noncore part of its cultural tourism business,” said Deng Zhihao, a real estate economist with Fineland Assets Management Company based in Guangzhou, China. “Ultimately, what they are selling are properties that the market doesn’t like.”

Loading comments...
Real journalists. Real journalism. Subscribe to The Boston Globe today.