Business Headlines No.5|Wang Jianlin "lost" Wanda

界面新闻记者 | 杨冰柯 彭飞

Interface News Editor | Li Shen

After several rounds of gambling, Wang Jianlin kept the public capital market credit and Wanda Commercial Management to continue to go public just a few days before the rare blizzard in Beijing in December.

The name "Wang Jianlin" has established itself in the global capital market, but at the cost of losing control of the Wanda Empire.

This is the choice made by Wang Jianlin, who is 69 years old this year, once re-elected as the richest man in China, and once surpassed Li Ka-shing to become the richest Chinese in the world.

At the end of 2023, with the listing of Zhuhai Wanda Commercial Management failing and the VAM agreement expiring less than a month away, Wang Jianlin needs to make a major decision to avoid paying about 30 billion yuan in equity buybacks.

As the world's largest commercial real estate operator, Zhuhai Wanda Commercial Management is the only large-scale real estate company that relies on a large number of operating projects to collect rents to stay afloat, which is safer than traditional development business during the real estate downturn.

But in the past three years, it has always had a shackle that must be lifted, namely a VAM agreement signed with investors - if it cannot be successfully listed, Dalian Wanda Commercial Management needs to pay about 30 billion yuan in equity buybacks to some investors before listing. This deadline will expire on December 31 this year.

For Wang Jianlin and Wanda Commercial Management, the cost of VAM failure is unbearable. In order to avoid triggering a buyback to put more pressure on the already tight cash flow and trigger a default crisis, Wang Jianlin must come up with a plan that satisfies investors.

Reaching a new agreement is equally challenging. The market environment is harsh, asset valuations have been revised sharply downward, and investors will obviously strive for greater benefits. This is also a psychological warfare, "big deal", and the assets and equity in the hands of investors are even less valuable.

Wang Jianlin did not lie flat. According to public information, on the day of "Double 12", Wanda signed a new agreement with investors. PAG (PAG), the largest strategic investor, will work with other investors to reinvest in its subsidiary, Zhuhai Wanda Commercial Management, after redemption by Dalian Wanda Commercial Management, upon the expiration of the redemption period of the original VAM agreement.

The new investment agreement will not be accompanied by a VAM agreement, which relieves Wang Jianlin and Wanda Commercial Management's urgent need.

The price paid for this is that Dalian Wanda Commercial Management's stake in Zhuhai Wanda Commercial Management has dropped to 40%, and it is still the single largest shareholder, with several existing and new investor shareholders such as PAG participating in the investment, holding a total of 60% of the shares. Prior to the new agreement, Dalian Wanda Commercial Management held more than 78% of the shares, and investors held 21.17%.

Although the new agreement allows Wang Jianlin to lose absolute control of Zhuhai Wanda Commercial Management and the right to maximum benefits, it is still significant. The confidence of the capital market has been maintained, and there is hope for the recovery of financing and the continued impact of listing in the future.

Over the past six years, Wanda has sold assets several times to save itself and transformed to asset-light operations, and now Wanda's remaining core assets are mainly in Zhuhai Wanda Commercial Management, which operates 494 large commercial centers but does not own any of these properties.

The main business segments of Wanda Group. Interface news collation

In the context of the indefinite suspension of refinancing and IPOs of real estate development enterprises, "asset-light" is the business model that Wanda is most likely to list and obtain a higher valuation.

This is not the first time Wang Jianlin has experienced a crisis. The last time was in 2017, when the "domestic guarantee and foreign loans" detonated the capital chain crisis, he immediately sold the cultural tourism city and the hotel, and returned 63.7 billion yuan to tide over the difficulties.

In this VAM crisis, he lost absolute control of the core asset platform Zhuhai Wanda Commercial Management and a controlling stake in Wanda Film.

has "broken his arm" many times, and Wang Jianlin seems to have seen it.

"Assets can be sold, and we can buy them back when we get better. Wang Jianlin once told executives internally.

Wang Jianlin's decisiveness and sincerity made foreign investors represented by PAG choose to continue to work together with Wanda. In addition to sufficient benefits, it also shows that they recognize Wanda's business management capabilities and are still optimistic about the prospects of domestic commercial real estate operations.

However, in the context of the industry downturn, the valuation and market value of real estate companies will inevitably shrink significantly. In the past two years, the market value of many insuring real estate companies has fallen by ninety, the market value of leading real estate companies Vanke and Poly has also fallen by more than 50%, and the valuation of Zhuhai Wanda Commercial Management is also falling. In 2021, the company was valued at about 180 billion yuan in its pre-IPO financing round.

Under the new agreement, according to investors, the valuation of Zhuhai Wanda Commercial Management is about 100 billion yuan, which is nearly half of the post-investment valuation in 2021. Country Garden, which entered the game at the beginning, also chose to withdraw due to its own debt crisis, losing 160 million yuan.

For investors, there will also be significant pressure on the valuation of investment targets to fall. After getting 60% of the equity of Zhuhai Wanda Commercial Management, the investors' ideas will also change, at least the supervision and management of the company will be strengthened.

PAG's chairman, Shan Weijian, is considered to be Wang Jianlin's "nobleman" this time, but his past investment style has been buy out, and he will deeply intervene in the investment target, transform the company, and then increase the valuation or exit after a successful listing.

Shan Weijian, Executive Chairman of the Board of Directors of PAG Investment Group. Image source: Visual China

His purpose has clearly not been achieved.

Now that the new agreement is more favorable to external investors, who have more control, Zhuhai Wanda will also enter a new phase. When it goes public again, Wanda may no longer be Wang Jianlin's Wanda.

Extreme Gaming

At the end of October this year, Wanda began to try to discuss with investors. Wang Jianlin made two preparations, one side continued to attack the unlikely listing, and the other focused on communicating with investors.

At this time, investors did not give a clear response.

Half a month later, seeing that there was no hope of going public, Wanda proposed a plan to investors to pay 30 billion yuan of equity repurchase money and corresponding interest in installments within four years. On the condition that Wanda provide investors with an additional 20% equity interest in Zhuhai Wanda Commercial Management as collateral.

A person close to Wanda told Jiemian News that Wanda hoped that the listing could be delayed until 2026 or even 2028.

But investors are not buying the plan and are lukewarm, which puts pressure on Wanda to come up with more lucrative terms with just over a month left on the payment deadline.

Wang Jianlin then began to frequently "cut meat" to raise money to prepare for redemption. He can also continue to make concessions to Zhuhai Wanda Commercial Management's equity.

Wanda's ultimate goal, even if it pays more conditions, is to knock on the door of investors again, so that they agree to postpone the listing plan of Zhuhai Wanda Commercial Management.

If the agreement to postpone the listing is not reached, Wanda will fall into a larger liquidity crisis and will also lead to a default on the public credit market, and the possibility of going public again is very slim.

Many investors, especially foreign investors, do not buy it, and there are good reasons why they do not buy it. In the past two years, they have been repeatedly "educated" by insurance companies. In the US dollar bond extension negotiations of many private real estate enterprises, most of the foreign creditors can only passively accept the extension plan.

Image source: Cai Xingzhuo, Interface News

Moreover, the domestic real estate industry is still at the bottom, and debt investors who are already struggling with the crisis are still terrified.

There are no more options in front of him, "in order to ensure that the ship does not sink, I can only continue to talk." One creditor said.

Since the second half of this year, the recovery of the property market and consumption has not been as sustainable as expected, and the capital market has insufficient confidence in real estate stocks.

Investors certainly want to get the most out of their interests possible, and the "whistleblower" is PAG, a private equity firm in the Asia-Pacific region.

In July and August 2021, Zhuhai Wanda Commercial Management introduced a luxurious lineup of 22 institutional investors, with a total investment of about 38 billion yuan, including domestic investors such as Ant Technology, Tencent, Country Garden, CITIC Capital, Warburg Pincus, China Merchants Capital, etc., and foreign investors such as the Zheng Yutong family and PAG Investment Group.

PAG was the largest single investor at the time, investing about US$2.8 billion (18 billion yuan) and holding 10% of the shares.

An investor told Jiemian News that PAG has recently been leading negotiations with Wanda Commercial Management on behalf of the investor group.

PAG, founded in 2002, is an Asia-focused private equity firm with more than US$55 billion under management in private equity, real estate, and credit and markets.

Shan Weijian, who is also nearly 70 years old, is the chairman of PAG Investment Group, and he is extremely well-known in the private equity circle, with experience in Wall Street investment banking, and is known as the "King of China's Private Equity" in the industry. He led the acquisition of Shenzhen Development Bank on behalf of TPG (formerly known as Xinqiao Investment), which was the first and only foreign takeover of control of a domestic national commercial bank.

The domestic companies in which PAG has participated under his leadership have been invested in a variety of fields, including Tencent Music, Lexin, Nai Xue's Tea, and Youran Dairy, all of which have been successfully listed. But there are also times when it misses, in 2017, it won the controlling stake of Zhenai.com, and then failed to reorganize it through backdoor.

Shan Weijian's investment philosophy is: "If there is no exit from the investment, the story will not be over, and the outcome will be uncertain".

Obviously, in the investment of Zhuhai Wanda Commercial Management, Shan Weijian will insist, but there must be sufficient returns.

A source close to Wanda told Jiemian News that PAG and the foreign investors he represents are staunch opponents of the initial extension plan, and they are also the creditors with whom Wanda has communicated most frequently in the early stage.

"On the one hand, there are concerns about the prospects of the domestic real estate market, and on the other hand, the conditions offered by Wanda are not attractive enough. ”

However, the reason why Wang Jianlin is confident that the negotiation can be completed is not only because he is willing to "cut meat", but also because of the progress of communication with major domestic investors.

Compared with the foreign investors represented by PAG, the domestic war investors have a relatively better mentality and are willing to overcome the difficulties with Wanda.

According to the above-mentioned people familiar with the matter, domestic investors represented by Tencent, Alibaba, CITIC Capital, etc., have a more intuitive feeling of the domestic real estate market and financial policy environment, and are willing to continue to maintain the credibility of Wanda's open market, and have a high degree of acceptance of the compensation conditions for the extension.

The postponement of the listing can ensure the equity value of Zhuhai Wanda Commercial Management in the hands of investors, and once the company goes to bankruptcy liquidation process, it is not the best option for all investors.

Wanda recently "pleaded" creditors to agree to the extension of a US$600 million bond, showing good faith and finally negotiating within two weeks.

This sets the stage for Wanda to continue negotiations with the war investor in the future.

Wanda has shown greater sincerity, and the new plan is also more beneficial to investors, so that they can regulate the operation of the platform more in the future.

"The boss was very resolute in the final plan, and made the maximum concession, which exceeded many people's expectations, which is also an important factor in being able to negotiate with the war investor in about a month and a half. A Wanda insider said.

"From the beginning of the negotiations, the boss has shown strong endurance and resistance to pressure, and his confidence in being able to complete the postponed negotiations is also very high. ”

In the past period, Wanda and investors have explored each other's bottom, and it is also the most intense stage of the game, and the final result is acceptable at the moment.

What is the way out

Zhuhai Wanda Commercial Management will continue to promote the listing in the future, and the sense of urgency will be much lighter.

The reason for the failure to go public, a person close to Wanda told Jiemian News that when the prospectus was submitted for the first time, a competitor reported that Wanda Commercial Management had problems with its internal operations. At the beginning of this year, another former employee reported that Wanda Plaza's internal operation data was falsified, and the store revenue and occupancy rate were inflated, which then attracted inquiries from the China Securities Regulatory Commission.

In the context of the overall reform of the financial system and the adjustment of institutions, the China Securities Regulatory Commission (CSRC) has been more strict and cautious in approving listed companies related to real estate and foreign countries. At the same time, the overall real estate market has declined, making foreign investors more cautious about investing in real estate-related enterprises.

The overall economic environment and the real estate industry are facing challenges, and Wanda should be in the limelight at this time, but the drama does not seem to be so sad.

It is understood that Wang Jianlin talked to Wanda's senior management about his most difficult time, "I have been in business for decades, and the biggest difficulty is that I didn't sleep for 9 days and 9 nights in Dalian in the 1990s. ”

Since then, Wang Jianlin has rarely shown fear and anxiety in front of everyone, and this time is no exception. In his opinion, this negotiation is not the most difficult moment since the beginning of business.

"He is very energetic, indomitable, much more diligent than other bosses and entrepreneurs, and he has been working at 7 a.m. every day for so many years. In the words of investors, he works two hours more a day than the CEO. ”

Core high-quality assets are the biggest bargaining chips for Wang Jianlin to tide over difficulties several times.

In 2017, it decisively sold 13 Wanda Cultural Tourism Cities and 76 star-rated hotels, and returned 63.7 billion yuan. Today's commercial projects across the country have made Wanda the strongest "rent collector".

From the perspective of investors like PAG, China's commercial real estate leader, with considerable and stable annual revenue and profits, is acceptable to continue to invest in the current market environment.

Zhuhai Wanda Commercial Management is the absolute leader in the field of commercial real estate in China, ranking first in revenue and rental income in the first half of this year. Its rental income and revenue were 23.11 billion yuan and 25.452 billion yuan respectively, ranking second was the central enterprise China Resources Vientiane Life, with a rental income of 10.5 billion yuan, less than half of Wanda's, and a revenue of 6.793 billion yuan, which is a bigger gap with Wanda.

Interface News is organized based on publicly available data.

In terms of business model, Wanda Commercial Management has completed the transformation from traditional asset-heavy development to asset-light operation, which is the ability that Wang Jianlin values most and is most confident in.

As of November this year, Zhuhai Wanda Commercial Management operates and manages 494 large-scale commercial centers, of which 290 are Dalian Wanda's commercial centers and 204 are third-party asset-light commercial centers.

After Wanda's transformation in the past few years, its capital expenditure on self-owned plazas is small, focusing on asset-light business expansion, and most of the new projects are asset-light escrow and agency operation models.

It is representative that in 2022, Wanda took over the operation and management of the Beijing Blue Harbor project, and after the readjustment of the positioning and format of the shopping mall, the passenger flow has increased significantly. Now, it has become a landmark for young people.

Wang Jianlin's confidence also comes from the recognition of many local governments for Wanda's commercial land production capacity to drive local economic development.

Since late October, Wang Jianlin has held work talks with principal leaders of Luoyang, Taiyuan, Danzhai, and Datong cities and counties in Guizhou.

On November 21, Wang Jianlin held a working meeting with relevant leaders of Datong City. Image source: Wanda's official website

In some provincial capitals and vast third- and fourth-tier cities, Wang Jianlin and his business model are still popular with local governments, and Wanda Plaza can also represent the most basic employment and economic vitality in these cities.

The times are gone

The sale of more equity in Zhuhai Wanda Commercial Management will also help alleviate the debt problem of the parent company Wanda Commercial Management.

A person close to Wanda told Jiemian News that the new agreement will bring a certain amount of incremental funds to Wanda Commercial Management, which will reduce its liquidity pressure.

In the context of domestic and foreign financing channels are still not smooth, Wanda can only rely on asset sales to recover. This year, it sold the equity of Wanda Film four times, with a total return of nearly 9 billion yuan.

In addition to Wanda Films, Wang Jianlin's most optimistic Wanda Commercial Plaza has also been put on the shelves in large numbers this year.

In Wang Jianlin's view, Wanda Commercial is an industry with the attributes of a money printing machine, and with rent, it can "sit firmly on a fishing boat regardless of the wind and waves".

He once said at the company's annual meeting, "Wanda Business is the core enterprise of Wanda, I can put any company, this can't be put away, everything can be lost, this can't be lost."

But this year his attitude has changed. An investment banker told Jiemian News that in the middle of the year, Wanda was selling a number of Wanda Plazas through investment banks, and the buyers it contacted were mainly insurance funds.

There are at least 5 Wanda Plazas that have been successfully sold, including Guangxi Beihai Hepu Wanda Plaza, Shanghai Zhoupu Wanda Plaza, etc., and the main receiver is Everyone's Life Insurance.

Wanda's assets on the shelves this year also include a third-party payment license fast money company, valued at about 1 billion yuan, and Infront Sports Media Company.

Interface news is sorted out according to public information. Drafting: Gu Lexiao

Most of the funds after the successful sale of assets were used to repay Wanda Commercial Management's debts.

According to data released by Wanda Commercial Management, as of November 23, more than 18 billion yuan of public debt has been repaid this year, and the current balance of domestic bonds has been reduced to about 6.9 billion yuan, of which 4.8 billion yuan needs to be repaid next year.

In terms of offshore debt, Wanda Commercial Management will repay the US$600 million debt that has been extended in four tranches next year, with a US$400 million bond due in 2025 and 2026 respectively.

This is only debt at the open market level, Wanda Commercial Management disclosed at the end of August this year in the interim report shows that its total consolidated interest-bearing liabilities reached 141.283 billion yuan, of which 29.257 billion yuan of interest-bearing liabilities due within one year.

Cash flow is also declining sharply. As of the end of the first half of 2023, the balance of cash and cash equivalents of Wanda Commercial Management was 14.692 billion yuan, a significant decrease of 53.44% year-on-year.

Wanda Commercial Management made a direct warning of debt pressure at that time: not only is the stock of interest-bearing liabilities large, and the maturity scale within one year is high, but the company still has a certain debt pressure. At the same time, the refinancing channels in the open market have not been restored for the time being, and the progress of the listing of Zhuhai Wanda Commercial Management is not as expected, making it more difficult to refinance in the open market.

This is also the root cause of Wang Jianlin and Wanda Commercial Management's continuous sale of assets to recoup funds throughout this year.

After the large-scale sale of assets, Wang Jianlin's business territory has been greatly reduced.

At its peak, Wanda Group led by Wang Jianlin was invincible, with business segments spanning real estate development, culture, film and television, tourism, sports, finance and other fields.

Internally, it has developed large-scale cultural tourism cities, and externally, it has bought a number of assets in Los Angeles, Chicago, London, Australia and other overseas countries, and acquired companies such as AMC and Legendary Pictures in the United States to call Disney. It has built a commercial aircraft carrier with total assets of 634 billion yuan, and has entered the world's top 500 in 2016 and 2017.

But after that, it's a series of "selling, selling, selling". Today, the most valuable asset sector of Wanda Group is only Wanda Commercial Management, which operates commercial real estate. Other cultural tourism groups and investment groups have a lot of business, but they don't have many core assets.

Interface news is sorted out according to public information. Drafting: Gu Lexiao

In the real estate development business, which has relatively large assets, after Wang Jianlin proposed to de-real estate in 2015, only some of the supporting stock residences around Wanda Plaza remained. And in the context of the current sluggish residential market, these projects in third- and fourth-tier cities are worrying.

At that time, during the real estate boom, Wang Jianlin was determined to de-real estate and transform to asset-light determination, which was once considered to have missed the golden age of real estate.

Wanda was once the first batch of real estate companies to enter the 100 billion camp, and the development volume was once higher than that of Evergrande, Country Garden and Sunac, but after the industry took a sharp turn in the past two years, the former industry leader "Hengbirong" fell into a debt crisis.

Wanda, on the contrary, persevered longer under this round of industry crisis.

In the current era of general credit crisis, real estate companies and bosses need to have a decisive attitude to save themselves and a family foundation that can be realized.

After reaching a new agreement with PAG and other investors, Wang Jianlin can breathe a sigh of relief for a while. Next, he also needs to lead Wanda, who is constantly slimming down, to continue to move forward.

Wang Jianlin, who is nearly seventy years old, is one of the few first-generation entrepreneurs who still insists on the front line, but his face is getting older and thinner, and his era has finally passed.