took over Wang Jianlin as the actual controller of Wanda Films, and Ke Liming, chairman of China Ruyi, went to the next city

Image source: Visual China

Blue Whale financial reporter Wang Jianwen

Nearly ten years later, with the announcement of the change of Wanda Film's rights and interests on December 16, Ke Liming officially took over from Wang Jianlin and became the actual controller of Wanda Film, a listed company with a market value of 100 billion.

882 million own funds + 1.293 billion loans, Ke Liming became the actual controller of Wanda Film

Wanda Film further announced the equity changes, the main body of the acquisition of Wanda Investment's equity is Ruyi Investment, which is 99% owned by Ke Liming, 1% held by Beijing Zhumeng Qiming, and Beijing Zhumeng Qiming is wholly owned by Ke Liming.

According to the announcement, as of the end of September 2023, the total assets of Ruyi Investment are about 271 million yuan, of which the balance of monetary funds held by the enterprise is about 215,100 yuan. The total liabilities were RMB305 million, with an asset-liability ratio of 112.49%. In the first three quarters, Ruyi Investment's revenue was 803,500 yuan, and the net loss was 3.2619 million yuan.

The other parties to the transaction are Wanda Culture, Beijing Hengrun and Wang Jianlin, who hold 20%, 29.8% and 1.2% of Wanda Investment's shares, respectively, for a total of 51%. According to the agreement, the above three parties will transfer 51% of the equity of Wanda Investment to Ruyi Investment for a consideration of 2.155 billion yuan. In July this year, Ruyi Film and Television, a company controlled by the listed company China Ruyi Agreement, purchased a 49% stake in Wanda Investment for a consideration of 2.262 billion yuan.

After the completion of this transaction, Ke Liming will indirectly control 20% of the equity of Wanda Film through Wanda Investment and become the largest shareholder of the company. The shareholding ratio of Wanda Culture and its concerted actors will be reduced to 10.9%. At this point, Ke Liming will replace Wang Jianlin and become the actual controller of Wanda Films.

In addition to the above two shareholders, Lu Lili, the wife of Shen Jun, the founder of the listed company Oriental Wealth, is the third largest shareholder of the company, with a shareholding ratio of 8.26%. In addition, Hangzhou Zhenxi Investment, GF Securities, China Merchants Securities and other institutions are also among the top ten shareholders of the company.

From the perspective of the source of funds, the announcement shows that the main investor in the acquisition of 51% of Wanda Investment's equity is Ke Liming himself. In 2015, Ke Liming sold 49% of the equity of Ruyi Pictures to the M&A fund of Tianjin Entertainment for 1.323 billion. Therefore, he has strong financial strength. Of the consideration of 2.155 billion yuan in this transaction, Ke Liming will contribute 882 million yuan with his own funds. The remaining 1.293 billion yuan was supplemented by bank loans applied for by Ruyi Investment.

After Ke Liming becomes the actual controller, he will continue to control the management rights of Wanda Films. According to the announcement, within one month after the equity delivery, Wanda Culture and its concerted actors should prompt more than half of the directors of Wanda Film to resign and be replaced by candidates recommended by Ruyi Investment, and the directors recommended by Ruyi Investment should serve as the chairman and legal representative. Wanda Culture has the right to retain two seats on the new board.

After the completion of this acquisition, it is also worth paying attention to whether the listed company Wanda Film and its large-scale Wanda Cinema Line will change their names. According to the announcement, the scope of this equity transfer transaction does not include trademarks containing "Wanda" in Chinese and English owned by Wanda Investment and Wanda Film. If Wanda Investment and Wanda Film need to continue to use trademarks such as "Wanda Film", "Wanda International Film", "Wanda Cinema Line" and "Wanda Cinema" in the future, they will need to sign additional agreements with Wanda Culture and other relevant parties.

However, in terms of business development, Wanda Film still has the support of Wanda. At present, Wanda Culture has prompted Wanda Commercial Management to adjust the lease contract term of Wanda Films, adjusting the contract of less than 10 years to no less than 10 years, and it can be renewed for 10 years after the 10-year lease period.

Wanda Investment, which is in urgent need of capital turnover, also needs to solve the sequelae of the previous performance VAM. In 2019, Wanda Film acquired Wanda Film and Television from Wanda Investment and other entities by way of fixed increase, and Wanda Investment signed a VAM agreement with Wanda Film, with the VAM period from 2018 to 2022 (extended by one year due to the epidemic). In this acquisition case, Wanda Culture and other transferors also promised to deal with the compensation obligation to avoid the negative impact on the reporting rights and interests of Ruyi Investment.

Deeply cultivating the capital market may control China's Confucianism

As the protagonist of this acquisition, Ke Liming was born in 1983. After graduating from junior high school, he went to Australia to study, and in 2006, he obtained a master's degree in money and banking from Griffith University, Australia. After that, Ke Liming chose to return to China to work, first in Hong Kong to work in finance, and then to Beijing, and began to enter the film and television industry.

As an investor and producer, Ke Liming has participated in the filming of TV series such as "The Frontier of Love", "No War in Beiping", "Langya Bang", "The Legend of Miyue", "Let's Love Each Other", as well as TV series such as "To Youth, So You Are Still Here", "To Our Dying Youth", "Old Boy Raptors Crossing the River", "Sewing Machine Band", "Send You a Little Red Flower", "Hello Li Huanying", "Exchange Life", "Keep You Safe" and other TV series.

During this period, Ke Liming also tried to send Ruyi Pictures into the capital market. In 2014, the listed company Zhongji Holdings planned to acquire Ruyi Pictures for a consideration of 1.5 billion yuan, but the deal was eventually halted by the China Securities Regulatory Commission. Since then, Ruyi Pictures has had a close relationship with Tianjin Entertainment and Jixiang Co., Ltd., a subsidiary of Shanshan Department.

In 2020, China Evergrande Holdings' Hong Kong-listed HengTen Network reached an agreement with Ke Liming, and in October of that year, HengTen Network acquired Virtual Cinema Entertainment Co., Ltd. (VCEL) for a consideration of HK$7.2 billion, and controlled three companies through VCEL, Ruyi Pictures, Beijing Jingxiu and Beijing Xiaoming.

Through this acquisition, HengTen Network has acquired the film and television drama production business of Ruyi Pictures and online streaming pumpkin movies, and as a result, the company's performance has achieved substantial growth. In 2021, HengTen Network's revenue reached 2.319 billion yuan, a year-on-year increase of 840.21%, and its net profit was 1.175 billion yuan, a year-on-year increase of 9676.57%.

But in 2021, as Evergrande continued to reduce its holdings of HengTen Network's shares, Ke Liming became the company's chairman, and HengTen Network also changed its name to China Ruyi the following year.

After Ke Liming took the helm of China Ruyi, he carried out three private placements, raising a total of 6.64 billion Hong Kong dollars.

In January 2022, China Ruyi issued 64 million shares to Water Lily, a subsidiary of Tencent Holdings, and 56 million shares to investor Liu Xueheng at a consideration of HK$2.50 per share, raising a total of HK$300 million. In July 2022, China Ruyi issued 163 million shares to Water Lily, 488 million shares to Sunshine Life Insurance, and 325 million shares to China Handi at a consideration of HK$2.40 per share, raising a total of HK$2.34 billion. The above two private placements are mainly used to expand the company's business and replenish working capital.

In July 2023, the company once again threw out a private placement plan and issued 500 million shares each to Water Lily, Liu Xueheng, Cubract Ventures, Yushan and Chengwan Development at a consideration of HK$1.6 per share, raising HK$4 billion. In this private placement, 2.469 billion Hong Kong dollars (about 2.262 billion yuan) will be used to acquire a 49% stake in Wanda Investment. The remainder of the proceeds will also be used for business expansion and replenishment of working capital.

As of August 31, the largest shareholder of China Ruyi was Tencent Holdings, with a shareholding ratio of 23.80%, and Ke Liming held 16.34% of the total share capital of China Ruyi, the second largest shareholder. At the same time, Ke Liming was granted 1.834 billion shares of China Ruyi through his wholly-owned company, Pumpkin Films Limited, and if the VAM is completed, this part of the warrants will be converted into ordinary shares, which means that under the existing equity ratio distribution, Ke Liming will become the largest shareholder of China Ruyi after completing the VAM commitment, and the equity proportion will also reach 34.84%, or he will win the control of China Ruyi.

As of the end of June 2023, China Ruyi's total assets totaled RMB13.048 billion, of which cash and cash equivalents amounted to approximately RMB889 million, total liabilities amounted to approximately RMB5.332 billion, and the asset-liability ratio was approximately 40.86%. In the first half of 2023, China Ruyi's revenue will be 804 million yuan, a year-on-year increase of 23.36%, and a loss of 264 million yuan during the period, turning from profit to loss year-on-year.

Increase the number of cinemas and open up the upstream and downstream industrial chains

The acquisition of Wanda Films may also allow Ke Liming to take a step forward in the film and television industry. Wanda Film also said in the announcement that Ke Liming's acquisition of Wanda Investment's equity was mainly due to the recognition of Wanda Film's long-term investment value and confidence in its future development prospects.

In the first three quarters of 2023, Wanda Film achieved an operating income of 11.348 billion yuan, a year-on-year increase of 46.98%, and a net profit of 1.128 billion yuan, which also achieved a year-on-year turnaround. In terms of film production, in the first half of 2023, a number of films produced or invested by Wanda Films, such as "I Want to See You", "Cosmic Exploration Editorial Department", "The Wandering Earth 2", "Warm", and "All or Nothing", will be released.

However, film production and distribution is not the main source of revenue for Wanda Films, which accounted for only 2.93% of Wanda Films' total revenue in the first half of 2023. Its cinema assets are the bulk of the company's revenue.

According to the financial report, as of the end of the first half of 2023, Wanda Film has a total of 708 directly-operated theaters and 149 asset-light theaters, ranking first in the country in terms of box office market share for 14 consecutive years.

In the first half of 2023, Wanda Film's movie-watching revenue alone will reach 4.042 billion yuan, accounting for 58.84% of the total revenue, in addition, the sales revenue of goods, catering and advertising revenue generated around the theater chain will also reach 983 million yuan and 610 million yuan respectively.