09 Feb 2017
AMC Theatres, a huge but in trouble American cinema operator, was about to be the next victim of an LBO with negative net results for few years. Therefore, the Hollywood tycoons and industry were very surprised when Dalian Wanda Group announced the acquisition of AMC Theatres for US$2.7 billion in 2012.
Private equity funds, owners of AMC Theatres had left the theatre chain to deteriorate day after day compared to its competitors so that the bulbs of the projectors were not changed, projecting poor quality films. AMC is an old cinema chain, in a sector where competition is fierce and with no growth market. One might even wonder if Wanda can make money after the acquisition, or simply enjoy a company in difficulty, help them getting their head above water and make another disastrous Chinese investment.
Nevertheless, 15 months later, Wang Jianlin, owner and chairman of Dalian Wanda Group and the second richest man in China at that time, saw the value of its shares in AMC Entertainment more than doubled, making a gain of US$800 million.
This essay aims to analyze and evaluate in detail how to value a cross-border acquisition from a Chinese perspective in the entertainment industry, analyse how China ownership impacted America's AMC performance and how Dalian Wanda got strategic gains like film distribution, chain management and production standards bringing new content or technology back to China. This analysis includes industry conditions and market conditions since the two companies went public, assess the rational of the transaction in the operating performance and how the two markets and business model differ from each other.
Meanwhile, this essay elaborates in detail how, through this acquisition, Wanda has turned into the biggest cinema operator in the world, and has gained a global key position, spreading Chinese soft power abroad.