Dalian Wanda Group, a conglomerate company which is one of the world’s largest real estate developers, is making one hell of a deal with Sunac, a Chinese property developer. Wanda will be selling 91% of its 13 largest tourism projects in a $9.3 billion deal which, according to Reuters, is the second largest property deal in Chinese history.
Dalian Wanda is known for its seemingly innumerable properties and stakes in China’s entertainment and tourism industries. In China, it is primarily recognized for its theme parks, which it markets as locally-sourced, cheaper versions of park legends like Disneyland. In addition to the multiple amusement parks, Wanda owns hotels, malls, apartments, and, more recently, companies in the entertainment industry such as AMC Theaters and Legendary Entertainment.
Last year, Wanda made headlines when owner Wang Jianlin, China’s second richest man, confidently told the press that his company was like a “pack of wolves” that would encircle and out-compete Disney’s $5.5 billion Shanghai amusement park. But it now seems like Wang may have been a bit hubristic. According to the Wall Street Journal, in this colossal deal, Wanda will be giving Sunac three of its largest theme parks, 76 hotels, and the ownership of nine other tourist attractions which have yet to be built. The shocking scale of the sale can be understood by the fact that the properties being sold made up 55% of Wanda’s $20 billion revenue from the first half of 2017. So why would Wang ever want to give up such valuable properties?
To be completely honest, no one really knows. Analysts are thoroughly intrigued by the news of the deal, especially considering the fact that Wanda has yet to give an official reason for the development. However, one thing is definitely true: the past few years have not been kind to Wanda. In 2016, Wanda opened a Nanchang theme park which was meant to destroy the Disney competition. But, Chinese tourists had other plans. Seven months after opening, the park had only attracted 1.3 million visitors, compared to the staggering 11 million which Shanghai’s Disneyland garnered in its first year after opening. Then, last month, the value of Dalian Wanda Group shares plummeted, which caused speculation about whether the company and its owner had fallen out of favor with the Chinese government.
This all comes amid rumors that Wanda has incurred tens of billions of dollars in debt, which it simply has not been able to pay off. But Wang reassured reporters from Caixin, China’s premier financial magazine, that the deal with Sunac would take care of the “overwhelming majority” of its bank loans from the past year. The deal also appears to be part of Wanda’s new “asset-light” initiative, which involves Wanda managing properties rather than owning them.
No one knows exactly why the deal occurred, but it’s clear that Wanda is trying to take a few things off of its very lucrative but very heavy plate. From the excessive debt to the risk of an extreme crackdown on private-sector companies by Chinese authorities, it’s no surprise that Wang Jianlin is looking for ways to make his company a little less high-risk. After all, trying to win a battle against Mickey Mouse is hard enough without being forced to look over your shoulder at Zhongnanhai.
Even though it looks like Wang has lost the battle against Disney, at least he has something the American company doesn’t: the world’s largest indoor ski resort… or is he selling that too?
By Emma Abrams
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