February 6, 2018 / 6:08 AM / 6 months ago

Breakingviews - Wanda thriller casts Jack Ma in supporting role

HONG KONG (Reuters Breakingviews) - Jack Ma just landed a supporting role in a financial thriller. The e-commerce titan he leads is buying a $750 million stake in a cinema chain owned by Dalian Wanda. It should help improve the picture at tycoon Wang Jianlin’s troubled conglomerate and might even bolster its ambitions to unite film production with theatres.

Alibaba Group Executive Chairman Jack Ma gestures as he attends the 11th World Trade Organization's ministerial conference in Buenos Aires, Argentina December 11, 2017. REUTERS/Marcos Brindicci

Wang is attempting a turnaround in his property-to-entertainment empire following a government crackdown on excessive corporate borrowing and risky overseas acquisitions. Since the start of 2017, Dalian Wanda has announced the sale of some $16 billion in assets, according to a recent tally by Reuters. The group’s commercial property division last week struck a $5.4 billion deal for a star-studded investment led by internet giant Tencent.

As part of the sale announced on Monday, Alibaba will end up with nearly 8 percent in the $10 billion Wanda Film, which operates China’s largest cinema chain, with over 500 locations around the country, many of them located in prime malls. The Shenzhen-listed outfit itself isn’t pressed for cash, but the money should help ease funding pressures for the parent company.

Cameo roles out of Beijing are noteworthy, too. A state-backed investment fund is joining Alibaba with almost another $500 million. In 2016, Wanda Film – then known by a different name – scrapped a plan to merge with another Dalian Wanda division, which included the unprofitable U.S.-based studio Legendary Entertainment. Official backing could help the company move forward with similar film expansion elsewhere.

Ma, meanwhile, gets a fresh shot to play the hero. Alibaba’s ill-judged attempt to make movies proved a flop. The 2014 acquisition of a Hong Kong-listed film production company led to the disclosure last week of a $2.8 billion impairment charge.

The distribution side of the business in China may be more promising. Domestic box-office sales jumped 13.5 percent last year, to $8.6 billion. Alibaba’s online movie-ticketing system also could fit in nicely at Wanda Film. The risk for Ma, other tech tycoons and their shareholders is that Dalian Wanda morphs from a thriller into a disaster. 

Breakingviews

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