"Cashing out" nearly 10 billion, Wang Jianlin sold Wanda Films, and Tencent benefited?

"China Economic Weekly" reporter Zheng Yangbo and Xi Guo Yushu

On December 6, Wanda Films (002739. SZ) announced that the company's indirect controlling shareholder, Beijing Wanda Cultural Industry Group Co., Ltd., its wholly-owned subsidiary, Beijing Hengrun Enterprise Management and Development Co., Ltd., and the company's actual controller Wang Jianlin, intend to transfer their total 51% equity of Beijing Wanda Investment Co., Ltd. (hereinafter referred to as "Wanda Investment") to Shanghai Ruyi Investment Management Co., Ltd. (hereinafter referred to as "Shanghai Ruyi").

As of the third quarter report of 2023, among the top ten shareholders of Wanda Film, Wanda Investment, Shenxian Rongzhi Xingye Management Consulting Center (Limited Partnership) and Lu Lili are the top three shareholders of Wanda Film, holding 20%, 10.21% and 8.26% of the shares respectively. At present, Shanghai Ruyi holds a 49% stake in Wanda Investment. After the completion of the transfer, it will hold 100% of the equity of Wanda Investment. It also means that Shanghai Ruyi will indirectly hold 20% of Wanda Film's shares and become the largest shareholder of Wanda Film. Wanda Films will be suspended from the opening of the market on December 6.

Since the beginning of this year, Wanda Investment has repeatedly reduced its holdings and transferred the equity of Wanda Film in exchange for "emergency funds" for Wang Jianlin. Behind this transaction, who will ultimately benefit from the transferred equity of Wanda Films, and will it become a crucial piece of the strategic puzzle?

"Cashed out" nearly 10 billion

This transaction is not Wanda's first "cash-out" this year. Since the beginning of this year, Wanda Investment has "cashed out" about 9.471 billion yuan several times by reducing and transferring the equity of Wanda Film.

From May to July this year, Wanda Investment reduced its holdings of Wanda Film three times, with a total of 56.58 million shares, and the cumulative market value of the reduction exceeded 700 million yuan based on the stock price during the trading period.

On July 10, Wanda Investment signed a share transfer agreement with Lu Lili, intending to transfer 180 million shares of Wanda Film held by it to Lu Lili, with a total transfer price of about 2.173 billion yuan.

On July 18, Wanda Investment once again planned to transfer 177 million shares of Wanda Film's unrestricted tradable shares to Shenxian Rongzhi Xingye Management Consulting Center (Limited Partnership) at a transfer price of 13.17 yuan per share, with a total transfer price of about 2.336 billion yuan.

On July 20, Wanda Culture Group signed the "Equity Transfer Agreement" with Shanghai Ruyi, and Shanghai Ruyi bought 49% of Wanda Investment at a price of 2.262 billion yuan.

On December 6, Wanda Investment plans to transfer the remaining 51% of the company's shares to Shanghai Ruyi. After the completion of the transaction, Shanghai Ruyi's indirect shareholding in Wanda Film through Wanda Investment will rise to 20%. The latest closing price of Wanda Film is 12.45 yuan per share, and if the equity price of Shanghai Ruyi's transfer of Wanda Investment is discounted, the transaction price will be about 2 billion yuan.

Why do you want to transfer?

According to the preliminary statistics of the National Film Funding Office of China, the annual box office of Chinese films in 2023 will exceed 50 billion yuan on November 13, and as a leading cinema chain, Wanda Film's operating efficiency has also continued to improve.

Wanda Film's third quarterly report shows that the company's operating income was 11.348 billion yuan, a year-on-year increase of 46.98%, and the net profit attributable to shareholders of listed companies (hereinafter referred to as "net profit") was 1.115 billion yuan.

In addition, in the first three quarters of this year, Wanda Film's domestic theaters achieved a box office of 6.22 billion yuan (excluding service fees), a year-on-year increase of 67.6%, an increase of 5.2% over the same period in 2019, and the number of moviegoers increased by 68.7% year-on-year to 150 million, an increase of 3.7% over the same period in 2019. In addition, Wanda Film's cumulative market share in the first three quarters of this year reached 16.5%, and its position in the industry is relatively stable.

The industry believes that Dalian Wanda Commercial Management Group Co., Ltd. (hereinafter referred to as "Wanda Commercial Management") has been affected by the fact that the refinancing channels in the open market have not yet recovered and the continuous net repayment of maturing debts has been greatly consumed recently, and the liquidity pressure has increased.

From a financial point of view, as of the end of the first quarter of 2023, Wanda Commercial Management's short-term debt has reached 38.77% of total liabilities, and its liquidity has decreased. According to the financial report, in the three years from 2020 to 2022, the company's total net profit reached 39.762 billion yuan, but fair value changes accounted for a large proportion.

From the perspective of debt, about 7.2 billion yuan of domestic and foreign bonds (including weighted calculations) will still mature in 2023, which will pose a great test to its ability to raise funds. At the same time, the Company's equity repurchase obligation to Zhuhai Wanda Commercial Management Group Co., Ltd. (hereinafter referred to as "Zhuhai Commercial Management") may expire at the end of 2023, and if the listing progress of Zhuhai Commercial Management is not as expected, the fulfillment of the Company's relevant repurchase obligations will increase the pressure on the Company's capital balance. As the company's medium- and long-term bonds gradually mature, the proportion of short-term debt has gradually increased.

On June 28 this year, Wanda Commercial Management submitted its IPO prospectus on the Hong Kong Stock Exchange for the fourth time. The prospectus will expire on December 28, just 20 days after the prospectus expires. Many market participants believe that the transfer of Wanda Film's controlling stake may be closely related to the repurchase pressure of the VAM agreement faced by Wanda Commercial Management due to the lack of hope of listing. According to the previous inquiry letter of the China Securities Regulatory Commission, according to the disclosure of the application materials, if Wanda Commercial Management cannot be successfully listed by the end of 2023, its controlling shareholder needs to pay about 30 billion yuan of equity repurchase money to pre-listing investors.

According to Blue Whale Finance, a person close to Wanda said that after submitting the prospectus to the Hong Kong Stock Exchange for the fourth time at the end of June this year, Zhuhai Wanda Commercial Management has been making "two-handed preparations", while cooperating with the Hong Kong Stock Exchange to promote the listing process, while negotiating with investors on the repayment of the 30 billion yuan repurchase money for the VAM. The person also revealed that due to the large number of Wanda assets and relatively high-quality assets, Wanda has provided investors with a variety of negotiation options, and is still in continuous negotiations with investors.

Who will be the biggest beneficiary?

According to the announcement, the transferee is Shanghai Ruyi. Shanghai Confucianism is China's Confucianism (00136. HK) is a subsidiary controlled by the agreement, and the actual controller of China Ruyi is Ke Liming.

According to public information, Ke Liming is quite influential in the film and television industry. Not only invested in China Ruyi and served as the chairman, but also led and invested in films such as "Hello Li Huanying", "Send You a Little Red Flower", "Animal World", "Sewing Machine Band", "To Our Dying Youth", "Old Boy Raptors Crossing the River", as well as TV series such as "No War in Peking", "Langya Bang" and "The Legend of Miyue".

According to Oriental Choice, on July 4, the largest shareholder of China Ruyi was Tencent Holdings (00700.HK), accounting for 21.973% of the shares, Tencent Holdings increased its holdings of 500 million shares over-the-counter, with an average price of HK $1.6 per share, and the latest number of shares held was 2.546 billion shares, with the latest shareholding ratio of 25.45%, becoming the largest shareholder of China Ruyi.

In recent years, Tencent has increased its holdings several times, demonstrating its confidence in the company's development. Ruyi Films, a subsidiary of China Ruyi, is a leading film and television company in the industry, implements the producer-centered system, has many high-quality original content, leads the production of more than 50 works, reserves hundreds of film and television copyrights, and has won important awards such as Feitian Award, Golden Eagle Award, Magnolia Award, and Huading Award.

According to the analysis of industry insiders, Tencent, as a major Internet manufacturer with a wide layout of film and television entertainment, Wanda Film has filled the key gap in its offline film and television entertainment. Previously, Tencent has laid out online literature (China Literature), film and television (Tencent Pictures), streaming media platforms (Tencent Video) and ticketing (Maoyan) almost all over the entertainment industry, but it lacks the link of cinema chain.

Editor-in-charge: Zhou Qi

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