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AMC Entertainment in talks to sell to China's Wanda Group

May 8, 2012 |  9:04 am

AMC IPO

AMC Entertainment, the United States' second-largest movie theater chain, is negotiating a deal to sell all or part of itself to Wanda Group, owner of China's largest theater company, two people familiar with the talks said.

The deal, if concluded, would make Wanda the first Chinese company to establish a major foothold in the North American theatrical business. AMC operates 5,048 screens in 347 theaters in the U.S. and Canada. It would also give AMC access to China's burgeoning market, which is in the midst of a multiplex building boom and was No. 2 at the international box office last year behind Japan, accounting for $2 billion in ticket sales, according to the Motion Picture Assn. of America.

The talks between AMC and Wanda have intensified in recent weeks in the wake of AMC's move to pull the plug on a planned stock offering to raise up to $450 million and use the proceeds to pay down debt, according to sources who asked not to be identified because the negotiations were confidential. Top shareholders in AMC include JPMorgan, Apollo Investment Fund and Bain Capital Investors.

AMC withdrew the offer because of concerns that market conditions weren't ripe for a stock offering, and possibly to position the company for a sale, people close to the transaction said.

A spokesman for AMC declined to comment, as did a representative for Wanda. News of the talks with Wanda was first reported by the New York Times.

Wanda Cinema Line Corp. Limited is the largest cinema chain in China. The parent company, Wanda Group, is a major player in real estate development including department stores and hotels.

The company has been in the news of late because its chairman, Wang Jianlin, is reportedly under investigation for ties to disgraced Chongqing party chief Bo Xilai. Bo was sacked, accused of corruption, and his wife charged with the murder of a British businessman. Wanda's headquarters are in the northeastern city of Dalian, where Bo was once a senior official.

AMC posted a loss of $82.7 million on revenue of $1.93 billion in the 39 weeks ended Dec. 29, 2011, compared to a profit of $36.88 million on revenue of $1.9 billion during the same period in 2010, according a filing with the Securities and Exchange Commission. The company cited higher interest expenses, investment losses in Beverly Hills-based 3-D technology company RealD and costs related to its acquisition of Kerasotes.

In May 2011, AMC closed a deal to acquire 92 theaters and 928 screens from Chicago-based Kerasotes Showplace Theatres, the nation's sixth-largest movie chain.

China has been heavily expanding its own entertainment industry, both to boost the country's global influence or "soft power" and to feed the demands of a surging middle class. Several Hollywood studios have been maneuvering to take advantage of the opportunity to grow business in China.

Burbank-based Walt Disney Co. recently said it would partner with the animation arm of China's Ministry of Culture and China's largest Internet company to help develop China's animation industry. Glendale-based DreamWorks Animation has announced a joint venture with Shanghai Media Group, China's second-largest media company, to build a family entertainment company to produce animated and live action movies and TV shows for the Chinese market. That deal was unveiled in February when Chinese Vice President Xi Jinping visited Los Angeles.

China is also rapidly expanding its theater industry. Although no major U.S. theater chain has expanded into China, Beverly Hills-based Real Inc. also has partnered with Beijing SAGA Luxury Cinema Management Co. to equip the Chinese theater chain with 3-D technology. Imax Corp., the Canadian big-screen theater company, also formed a joint venture with Wanda  to open 75 theaters by 2014.

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-- Richard Verrier and David Pierson

Photo: An AMC theater in Burbank. Credit: Ringo H.W. Chiu / For The Times

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