Chinese companies keep making deals with Hollywood. And, they just keep unraveling… over and over.
In November, the Dalian Wanda Group announced that it planned to spend $1 billion to purchase Dick Clark Productions. Now, that deal is no longer on the table.
Friday, CNBC reported that Eldridge Industries told the press that the deal with Wanda was terminated because the company “failed to honor” its obligations expressed in the contract.
Wang Jianlin is the Chinese billionaire behind the Wanda Group. He’s been buying up everything he can get his hands on in Hollywood. A few years ago, Wanda purchased AMC Theaters. In January, it bought Legendary Entertainment. These billion-dollar deals were just the beginning of a Hollywood buying spree.
In May, the group purchased Carmike. That deal turned AMC Theaters into the world’s largest movie theater chain. Wang had also been eyeing at least one of Hollywood’s Big Six studios. As of yet, that dreamed hasn’t transformed into a reality.
The Daily Caller reports:
The company appeared to still be running hot in January when Wang announced that Wanda intended to spend up to $10 billion on entertainment deals overseas in 2017.
In February, news broke that Wanda was struggling to move funds out of China due to government efforts to control capital outflow, putting the Dick Clark Productions deal in jeopardy. The deal was to be Wanda’s first entry into U.S. television, but Wanda appears to have lost the ability to finance the deal.
In response to strong criticisms of Chinese trading practices in Washington and the significant drop in the value of China’s currency, China’s government has been introducing new regulations to prevent capital flight and the further devaluation of the Chinese yuan.
To curb capital outflows, China has been rapidly draining its foreign exchange reserves to prop up its currency and restricting purchases and acquisitions overseas. In particular, Chinese companies face daunting hurdles when they attempt to secure offshore funding to pursue assets abroad.
Wanda is not the only Chinese company encountering difficulties in Hollywood.
A deal for Metro-Goldwyn-Mayer Studio involving several Chinese companies fell through as a casualty of increased regulatory scrutiny in Beijing, the Wall Street Journal reported in late February.
Talks started to break down last year.
Chinese “investment activity around [Hollywood] assets started to wane just prior to the election and is almost nonexistent now,” Chris Fenton, a trustee of the U.S.-Asia Institute, told WSJ reporters, citing reports from private firms and investment banks. He added that there isn’t a Chinese company prepared to test the heated protectionist rhetoric in Washington or the increased regulatory pressures in China.
In December, Anhui Xinke New Materials Co. suddenly canceled its planned $350 million acquisition of Voltage Pictures LLC without any explanation. The deal is believed to have fallen prey to the new Chinese government regulations on the purchase of assets abroad.
China spent $225 billion on overseas purchases last year. China is desperately trying to rein in overseas spending to restore confidence in its economy.
The country has not completely cut off its major asset acquisition efforts abroad, but Hollywood deals are taking a hit.