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Gerry Lopez, right, CEO of AMC Entertainment, listens to a question next to Wang Jianlin, president of Wanda Group, during a media conference in Beijing on Monday, May 21, 2012. Wanda Group, one of China's largest theatre owners, has agreed to buy AMC Entertainment in a deal valued at $2.6-billion, creating the world's biggest cinema operator, the companies said. (DAVID GRAY/DAVID GRAY/REUTERS)
Gerry Lopez, right, CEO of AMC Entertainment, listens to a question next to Wang Jianlin, president of Wanda Group, during a media conference in Beijing on Monday, May 21, 2012. Wanda Group, one of China's largest theatre owners, has agreed to buy AMC Entertainment in a deal valued at $2.6-billion, creating the world's biggest cinema operator, the companies said. (DAVID GRAY/DAVID GRAY/REUTERS)

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Wanda buys AMC: China goes to Hollywood Add to ...

When the 3D film Avatar hit China, 2,000 people braved temperatures of -10C to queue for tickets. The Chinese like movies. And if you are a local cinema owner in search of a little glitter, where else are you going to look for it except in the homeland of Hollywood? Especially if you are planning an initial public offering.

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That is the logic behind Monday’s announcement that Dalian Wanda, the largest owner of cinemas in China, is buying AMC Entertainment, the U.S. cinema operator, for $2.6-billion, including debt.

Wanda is expanding its cinema network at home to tap the 30 per cent annual growth in China’s $2-billion of cinema box office revenues. So it has much to learn from the U.S. - the world’s biggest cinema market with annual box-office sales five times bigger than China’s. By keeping AMC’s management in place Wanda should gain knowhow.

And the deal will not do any harm in the run-up to the pending A-share listing of Wanda’s cinema unit in Shanghai.



Meanwhile, Kansas-based AMC needs capital to refurbish existing cinemas and expand. Its revenues grew just 2 per cent over the past three quarters, half the rate of U.S. box-office sales growth over the year. It also made net losses of $83-million. Wanda says it will invest $500-million on expansion and technology, which should secure its strategic position. But this is not yet a done deal.



The U.S. has rejected direct Chinese investment in the past - think Cnooc-Unocal and Huawei-3 Leaf, though it is unlikely to consider cinema as a strategic industry. But regulatory approval is also required on the Chinese side. Wang Jianlin, chairman of Wanda and China’s seventh richest man, is a contentious figure. Details of how Wanda intends to fund the deal remain elusive. The deal makes strategic sense for both parties. But a Hollywood ending is not certain.

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