China's Wanda Pictures Adds $2.4 Billion To Its Moviemaking War Chest

Wanda Pictures, the film production division of China’s giant Wanda Group, announced this week that it has raised 15.88 billion yuan ($2.44 billion) in a private placement of its shares.

The studio’s parent company has made a series of deals in recent years designed to fulfill Chairman Wang Jianlin’s stated goal of building one of the world’s biggest entertainment conglomerates. Already owner of the world’s largest theatrical exhibition operation via its Wanda Cinema Line in China, AMC Theatres (NYSE:AMC) in the U.S. and Hoyts in Australia, the company is building what will be the world’s largest production base in Qingdao, and is on its way to establishing itself as a major player in film production.

Even before it announced its $3.5 billion acquisition of Legendary Pictures in January, Wanda had staked a claim in the Hollywood movie business with its $30 million investment in Southpaw, the boxing drama directed by Antoine Fuqua and starring Jake Gyllenhaal.

Mainly focused on domestic Chinese projects, Wanda Pictures has matured from a minority investor in such local hits as The Monkey King and The Taking of Tiger Mountain in 2014, to taking a lead role in developing, financing and producing such blockbuster hits as last December’s Mojin—The Lost Legend.  Mojin became one of China’s biggest hits in 2015 with a final domestic box office gross of more than $250 million.

Wanda Pictures also played the lead producing role in 2015 hits Detective Chin Tang ($127 million box office gross) starring Wang Baoqiang, and Go Away Mr. Tumor ($82 million), which featured screen diva Bai Baihe.  Ms. Bai also stars in another Wanda Pictures release, Chongqing Hotpot, which will open across in PRC multiplexes on April 1st.

Wanda’s Vice President Liu Zhaohui said that the company had initially sought to raise 10 billion yuan ($1.53 billion) and that its offering was oversubscribed. According to Bloomberg, Mr. Liu declined to comment on a recent Credit Suisse AG report that estimated Wanda Pictures’ valuation at 48 billion yuan ($7.37 billion). That figure would put the company’s value in the same range as the publicly traded Alibaba Pictures (HKG:1060), which closed trading in Hong Kong today at a market capitalization of US$5.6 billion.

It should be noted that Wanda is a privately held company with limited disclosure requirements and a history of making major press announcements that are difficult to independently validate. As a source close to Wanda (who asked not to be named) told me, “Wanda is a PR machine, and Wang Jianlin is a politician, not a businessman. But Wanda is the player to work with in China because they have the full backing of the Chinese government.”

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