Chinese developer Dalian Wanda Group said it would sell a majority stake in many of its theme parks to rival developer Sunac China a year after its chairman boasted of driving Disneyland out of China.
Dalian Wanda announced on Monday that Sunac would pay Rmb63.2bn ($9.3bn) for 76 Wanda hotels as well as taking a 91 per cent stake in 13 of Wanda’s tourism projects in China.
Wanda Hotel Development’s Hong Kong-traded shares shot up 145 per cent on Monday morning on the news.
Among the projects in the deal is the Nanchang Wanda City, which the company opened last year and Wanda chairman Wang Jianlin had talked up as a competitor to Disneyland Shanghai. Mr Wang had boasted that his theme parks would “make Disney’s China venture unprofitable”.
The sale is part of Wanda’s “asset-light” policy, a plan launched two years ago to sell its real estate assets to investors with whom the company would share its rental income. Several major Chinese developers, such as China Vanke and Soho China, have launched asset-light policies in the past two years to limit their exposure to the turbulence of Chinese property prices. Under the model, developers finance and manage the projects on behalf of third-party investors but do not own the land or buildings.
A Wanda City park in Harbin, northeastern China © EPA While other developers are selling off assets, Sunac is aggressively buying them up in property and leisure. The cash-rich developer sank $2.4bn into rescuing technology group LeEco, known for video-streaming and its US autonomous car ventures, earlier this year.
Mr Wang said the deal would cut the debt of Wanda's recently delisted Dalian Wanda Commercial Properties, and that the group as a whole planned to clear all its debts during the next three years.
Wanda has in recent months been trying to pacify financial regulators concerned about debt-fuelled acquisitions abroad. Last month China’s banking regulator confirmed it was examining banks’ exposure to Wanda and a handful of other major business groups — HNA, Fosun and Anbang — amid worries that their big offshore deals could strain the balance sheets of China’s domestic banks.
Wanda said that it had no exposure to offshore deals that are in danger of imploding. The conglomerate, which has three publicly listed subsidiaries but is itself privately owned, released half-year results on Thursday showing that it was healthy, with 12 per cent year-on-year revenue growth.
Debt levels at its listed subsidiaries, which publish audited financial statements, were not flagged by experts as unusually high. However, analysts all said that there was no public information on the debts of Wanda’s unlisted parent company. Wanda declined to comment on the debts of the parent.
Sunac's chair said in a Caixin interview that the acquisition would be fully funded by the company's cash holdings of Rmb90bn, as of the end of June, which have come from the group’s strong property sales.
Sunac has grown remarkably in the past year, with property sales up 121 per cent in 2016, according to its annual report. But it has also embarked on a spree of debt-funded acquisitions within China, largely in real estate. The company more than doubled its land reserves in 2016.
As a result of Sunac’s rapid expansion, Fitch Ratings and Moody’s have downgraded the company’s outlook from stable to negative.
