Alibaba Group Holding Ltd announced that it has agreed to acquire a stake in China’s Dalian Wanda Group Company’s cinema operator unit for an investment totaling over $1.2 billion. Under the terms of the agreement, Alibaba would pay Wanda Film Holding Co a sum of 4.68 billion yuan for a stake of 7.66%, which would make the e-commerce the second shareholder of the company. The Cultural Investment Holdings, which is controlled by the China government, will pay the remaining 3.21 billion yuan for the 5.11% stake.
The acquisition is the first major sale that Wanda Films has ever made to the external investors after it was listed on the Shenzhen bourse in 2015. The grand sale comes at the time when the billionaire founder Wang Jianlin is selling off some of its assets from his real estate and hotels to help in paying debts. The fundraising also comes at the time when the company is restructuring its film unit, whose shares have been suspended from trading in the stock market since July 2017.
Alibaba stands to benefit more by investing in Wanda since the company’s founder, Jack Ma plays a major role in China’s film industry and is projecting to become the world’s largest box-office by the year 2020. In 2016, Alibaba acquired a stake in Amblin Partners through its Alibaba Pictures Group Ltd, a subsidiary of the company. Alibaba is currently competing in the film space with Tencent Holdings Ltd, which is also taking up movie and TV production.
Wanda Film will now work closely with Alibaba and the Cultural Investment Holdings to enhance various areas of operation including the film distribution, marketing, financing, advertising, and e-ticketing according to the regulatory filing. The company has sold a chain of stakes to investors for the last six months, a move that the government has scrutinized closely. However, Wanda stated that it will still hold a major stake and confirmed that the latest deal with Alibaba would bring in strategic shareholders.
Last year, Wanda faced pressure from the government to scale down its business operations after spending more than $3.5 billion on foreign production studio Legendary Entertainment and about $ 2.6 billion on the cinema chain AMC.
The company announced last week that it would sell a $5.4 billion stake to Tencent. Furthermore, the company has sold more than $9 billion in the tourism and hotel assets within China to two Chinese property developers.