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article imageUS cinema chain AMC sold to China's Wanda for $2.6 billion

By Kay Mathews     May 21, 2012 in Business
Beijing - Many moviegoers worldwide will soon be sitting in Chinese-owned movie theaters after a deal was inked between the Dalian Wanda Group, a Chinese conglomerate, and AMC Entertainment making Wanda the world’s largest cinema operator.
AMC's chief executive officer Gerardo I. Lopez attended a signing ceremony in Beijing, China on May 21 at which the Dalian Wanda Group Co., Ltd. ("Wanda") agreed to acquire AMC Entertainment Holdings ("AMC"). Reuters describes the deal in this way: "Largest overseas acquisition by private Chinese company."
The Buyer
Bloomberg Businessweek indicates that the "Dalian Wanda Group Corporation Ltd. develops commercial properties, luxury hotels, cultural industries, film screens, and chain stores." Based in Dalian, China, Wanda was founded in 1988 and is "a subsidiary of China National United Oil Corporation Co., Ltd."
Headquartered in Beijing, the "China National United Oil Corporation Co., Ltd. engages in the production and trading of oil and petroleum products," Bloomberg Businessweek states. No key executives were named, but it was reported that "As of 2007, China National United Oil Corporation Co., Ltd. operates as a subsidiary of China National Petroleum Corporation."
The lineage of Wanda, then, can "be traced back to early days of the People's Republic of China." China National Petroleum Corporation indicates that it was once a "governmental department" but is now "an international oil company."
The chairman and president of the private Chinese company, Dalian Wanda Group Co., that is buying AMC is billionaire Wang Jianlin, 57. In a news release issued by AMC, Jianlin is quoted as saying,
This acquisition will help make Wanda a truly global cinema owner, with theatres and technology that enhance the movie-going experience for audiences in the world's two largest movie markets. Wanda has a deep commitment to investing in the entertainment business and is already the largest in this sector in China, with more than US$1.6 billion invested in cultural and entertainment activities since 2005.
The Seller
Founded in 1920 and headquartered in Kansas City, Missouri, AMC Entertainment Holdings, Inc. "owned, operated, or had interests in 357 theatres and 5,098 screens in 31 states and the District of Columbia, and 4 countries outside the United States" as of June 30, 2011, according to Bloomberg Businessweek.
AMC is the second-largest U.S. cinema chain with Tennessee-based Regal Entertainment Group holding the top spot. With 128 currently in use, AMC is the world's largest operator of IMAX screens.
The ownership of AMC is divided among private investment groups Apollo Investment Fund, Carlyle Group, Bain Capital, CCMP Capital Advisors, and Spectrum Equity Capital.
The Deal
In total, the full deal will cost Wanda $3.1 billion. That amount includes $2.6 billion to "purchase AMC’s full stake and inherit AMC’s debts," Wanda reports. Moreover, Wanda has promised "to input not more than $500 million for AMC operation after the merger." AMC's net debt is reported to be $1.9 billion.
After AMC becomes a subsidiary of Wanda, AMC's current management team is expected to stay on and the "transaction is not expected to have an impact" on the approximately 18,000 AMC employees. In addition, according to the AMC news release, "AMC's headquarters will remain in the Kansas City metropolitan area and day-to-day operations, including the process for film programming, will remain unchanged."
The Wanda press release states, "After the merger, the Wanda Group owns AMC, world’s No.2 Cinema Line, and Wanda Cinema Line, Asia’s No.1, becoming the world’s largest cinema operator."
"The deal also highlights the rising appetite of Chinese private sector companies for overseas assets," Reuters states. "China's state owned enterprises have so far dominated large global acquisitions."
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