Introduction

Wanda Investment, a subsidiary of the privately-owned Chinese property giant Dalian Wanda, has sold an 8.3% stake in Wanda Film Holding for RMB2.2 billion ($306 million).

Background

Wanda Film, which is listed on the Shenzhen stock exchange, operates China’s largest circuit of multiplexes and retains a stake in Hollywood producer Legendary Entertainment (“Dune”).

The Buyer

The buyer is Lu Lili, the wife of Shen Jun, the controller of East Money Information, a financial data platform, Wanda Film said in a regulatory filing this week.

Financial Move

The share sale appears to be a move to raise finance for Dalian Wanda and Wang Jianlin, the politically-connected former army officer who built one of China’s largest property empires and from 2012 mounted a seven-year campaign to own a large chunk of Hollywood.

Chinese Government’s Intervention

The Chinese government’s move in 2018 to rein in Wang and Dalian Wanda’s mounting debts brought an end to that battle. Following that intervention, Wanda sold off its Chinese studios and theme parks, some of its Chinese hotels, its Beverly Hills property development, and most of its stake in North American cinema chain AMC. In January last year, Legendary brought in outside capital from Apollo.

Debt Problems and Pruning

But, in recent months, debt problems across much of China’s commercial property sector have led to corporate defaults and slowed the Chinese economy’s post-COVID recovery. Despite its earlier pruning, Dalian Wanda has not been immune, and the group is also attempting to sell its Hoyts cinema chain in Australia.

Share Sale Details

Over the past month, Wanda Investment also sold 1% of Wanda Film in the open market, while other group units acting in concert sold another 2% stake. Following the latest share sale, the stake in Wanda Film controlled by Wanda Investment and its partners will shrink to 31%. But it will remain Wanda Film’s largest shareholder.

Challenges Faced by Chinese Cinemas

Chinese cinemas were last year tipped into crisis by the government’s tough response to a 2022 surge in COVID cases, rolling lockdowns, and other restrictions.

Financial Performance of Wanda Film

Wanda Film reported a net loss of RMB 581 million ($80.7 million) in the first half of last year. It has recently issued guidance suggesting that it will be able to announce net profits in the RMB380-420 million ($53 – $58 million range) for the January-June 2023 period.

Market Share and Operations

Wanda Film reported that the box office in China is up by 50% in the first six months of the year and said that its own market share had grown to 16.8%. At the end of March, the company operated 857 theaters in China, with 7,203 screens.

Imax Theaters and Delisting

Wanda Film is also China’s largest operator of Imax theaters. On Wednesday, Imax Corp. announced plans to delist its Hong Kong-traded Imax China subsidiary.