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Dalian Wanda to sell assets to Sunac China to repay debt
The design sketch of  Wanda theme park in Hefei  Photo: image.baidu.com
 
Chinese developers Dalian Wanda Group and Sunac China jointly announced on Monday that Sunac would pay RMB 63.2bn for 76 Wanda hotels and a 91 percent stake in many of its theme parks. The acquisition, being the biggest-ever in China’s real estate sector, is believed to be made possible by the favorable terms of payment prescribed by Dalian Wanda and the company’s urge to lower debt-to-asset ratio.

The sale of leisure properties is interpreted as going with Wanda’s “asset-light” policy, a plan launched two years ago. Several major Chinese developers including China Vanke and Soho China have resorted to similar policies in the past two years to limit their exposure to the country’s unpredictable real estate market.

Analysts are also swarming to make a guess at how and why a highly leveraged company like Sunac could acquire large chunks of assets from less-leveraged Wanda. From 2016 till now, Sunac China, a Chinese developer listed on the Hong Kong Stock Exchange with a market capitalization of HK $57.7bn has spent nearly RMB 130bn on acquisitions.

And when most developers are selling off assets, Sunac is eyeing the opportunity to buy in. The company had used up RMB 15bn for the high quality assets of technology group LeEco this year.

Based on the jointly released statement, Sunac China is to make the payments in four installments. And Dalian Wanda would provide a three-year term loan of RMB 29.6bn to Sunac before the company made its fourth payment of RMB 29.5bn. The preferential terms are believed to have facilitated the RMB 63bn deal.

Wanda would continue its work related to branding, planning, construction and operation of all the Wanda Cultural Tourism City projects, according to the joint statement.

Only a year ago, Chinese real estate mogul Wang Jianlin had boasted his theme parks included in the cultural tourism projects were a “pack of wolves” that would defeat the lone “tiger” of Disney’s Shanghai resort. Half a year ago, he vowed that in just five years’ time, Wanda City project could pull in RMB 100bn.

Now, many analysts believe Wanda has made an abrupt decision to sell a majority stake in its totally 13 tourism projects.

In the past half month, Wang attended two Wanda Cultural Tourism City events in high profile ways - one was the Wanda City opening in Harbin, and the other  an ethnically themed tourism village at Danzhai County, Guizhou Province. On January 14 this year, Wang promised to increase the group’s investment in tourism and planned to launch 25 Wanda City projects worldwide by the year 2025.

“All the cash from the deal would be used to pay down debt, and Wanda Commercial plans to pay off most of its bank loans within the year,” said Wang, the founder of Dalian Wanda Group, on Monday. By the end of the first quarter, Wanda Commercial’s debt ratio stood at 70 percent, not high for the industry.

Over the past years, Dalian Wanda Group had braved into Hollywood by acquiring the AMC Theaters chain and production company Legendary Entertainment. Now, big overseas M&A deals are put under more strict scrutiny in China. Chinese regulators have been worried about financial risks from overseas asset buys, and had ordered inspections of the debts of Wanda, Fosun, HNA and others.

Last month, Wu Xiaohui, the chairman of the Anbang Insurance Group, had been detained for investigation. Anbang has grabbed many headlines in recent years for its high-profile overseas acquisitions.

Wanda Hotel Development’s Hong Kong-traded shares rose as much as 150 percent in early trade Monday on the news, and closed up 47 percent.   

 


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