Photo source: Visual China

Blue Whale financial reporter Wang Jianwen

On the evening of April 16, Wanda Culture and Wang Jianlin transferred 21.2% of the shares of Wanda Investment, the controlling shareholder of Wanda Film, to Confucian Investment, a subsidiary of Ke Liming. So far, Ruyi Investment has transferred a total of 51% of Wanda Investment's shares, and Ke Liming has taken over the largest domestic theater line and officially became the actual controller of Wanda Films.

Confucius's entry into Wanda movies didn't happen overnight. In July 2023, the listed company China Ruyi took over 49% of Wanda Investment's shares in consideration of 2,262 billion yuan. In addition to 51% of the shares transferred by Confucian Investment, the “Confucian Group” has taken all of Wanda Investment's shares.

Since Wanda Film was founded, Wang Jianlin once had high hopes for it, but as the pressure on Wanda's debt gradually approached, it also had to “cut meat” to pay off the debt. As for Coliming, the other party in this deal, after taking control of Wanda Films, it was also able to use Wanda Film's nearly 900 theatrical assets to open up the upstream and downstream film industry chains.

Coliming takes over from Wanda Films

As early as December 2023, Wanda Films began planning a change of ownership.

On December 6, 2023, Wanda Film officially announced the suspension of trading and began planning a change in control. Ten days later, the company announced the details of the deal.

The controlling shareholder of Wanda Film is Wanda Investment, which holds a total of 20% of the shares in listed companies. In this transaction, Ruyi Investment, under Ke Liming's control, will acquire 51% of Wanda Investment's shares at a consideration of 2.55 billion yuan. Among them, Wanda Culture, Beijing Hengrun, and Wang Jianlin will transfer 20%, 29.8%, and 1.2% of the company's shares, respectively.

After the transaction was finalized, Wanda Investment's equity transfer began to be carried out in an orderly manner. In January 2024, Beijing Hengrun transferred 29.8% of its shares in Wanda Investment to Ruyi Investment. On the evening of April 16, Wanda Culture and Wang Jianlin transferred 21.2% of their shares in Wanda Investment to Confucian Investment. At this point, the transfer of 51% of Wanda Investment's shares has been completed.

In addition to the 51% shares mentioned above, in July 2023, Ruyi Film and Television, a Hong Kong stock listed company under the control of China's Ruyi, purchased 49% of Wanda Investment's shares at a price of 2,262 billion yuan. Ke Liming holds 16.34% of China's Ruyi shares and is the company's chairman.

After the transaction was completed, Ke Liming controlled 100% of Wanda Investment's shares through Confucian Investment and China's Confucian, and then indirectly controlled 20% of Wanda Film's shares. Meanwhile, the shareholding ratio of Wanda Culture and its supporters will drop to 10.9%. At this point, Ke Liming replaced Wang Jianlin and officially became the actual controller of Wanda Films.

As Coliming replaced Wang Jianlin in Wanda Films, the company's management also began to change. On January 13, 2024, Wanda Film Chairman Zhang Lin and Director Yin Xiang announced their resignations. Chen Xi and Gong Qiao took over the positions of directors. On January 30, Chen Xi was elected as the new chairman of Wanda Film.

Both of the new directors are old people of Confucius. Among them, Chen Xi (stage name Chen Zhixi) was the executive director of Ruyi in China, and she is also a well-known actor and producer in China. In 2003, she collaborated with Siqin Gaowa on “Out of the Blue Water River” and became famous for her role as the character “One Flower” in the film. Since then, she has worked as a producer on many films such as “Enthusiastic,” “Keep You Safe,” and “Hello, Lee Hwan-young.” Gong Jiao, on the other hand, has extensive experience in the game industry. Before joining Confucian China, he worked for companies such as Guangyu Games, Shanda Games, and Qihoo 360.

After this equity settlement, Wanda Film is likely to welcome more directors representing Confucian investment. According to the agreement between the two parties, within one month after the equity settlement, Wanda Culture should push for more than half of the directors of Wanda Film to resign and be replaced by candidates recommended by Ruyi Investment. However, Wanda Culture is entitled to reserve two seats on the new board of directors.

Furthermore, it is also a matter of concern whether the listed company Wanda Film and the large-scale Wanda movie line under its name will change their name after the change of ownership.

Although Ruyi Investment transferred the shares of Wanda Investment, the Chinese and English “Wanda” trademark was not included in this transaction. In other words, if Wanda movies still have to use trademarks such as “Wanda Cinemas” and “Wanda Cinemas” in the future, they will also need to sign additional agreements with relevant parties such as Wanda Culture.

However, on the business side, Wanda still gave support to Wanda Films. When the equity transfer agreement was signed, Wanda Commercial Management uniformly adjusted the term of the lease contract for Wanda Films. A contract with a lease period of less than 10 years is adjusted to no less than 10 years, and the lease can also be renewed for 10 years after the contract expires in the future.

Under debt pressure, Wang Jianlin had no choice but to cut meat

In 2005, Wanda Film was incorporated in Beijing. After Wanda Film was founded, Wang Jianlin had high hopes for it and boasted, “If you enter an industry, you can either be number one in China or number one in the world. The goal is to buy Hollywood companies and bring technology and capabilities to the country.”

According to relevant research reports, as of December 31, 2023, Wanda Film has 905 opened cinemas and 7,546 screens in China, with a market share of 16.7%, ranking first in the industry for many years.

As the impact of the pandemic subsided, the domestic film industry began to recover. In this context, Wang Jianlin chose to transfer shares in Wanda Film and Television, which was also a helpless move under debt pressure.

Since October 2021, Wanda Commercial Management has submitted 4 consecutive listings to the Hong Kong Stock Exchange, but so far it has not been successfully listed. However, according to the gambling agreement signed between Wanda Commercial Management and investors, if the company fails to successfully go public before the end of 2023, investors have the right to request that it repurchase the shares held by these investors, with a potential repurchase amount exceeding 30 billion yuan.

Other than the gambling agreement, Wanda Commercial Management's own debt situation is also not optimistic. According to the 2023 bond interim report issued by Wanda Commercial Management, as of the end of June 2023, the company's interest-bearing liabilities due within one year reached 29.257 billion yuan, but the company's cash and cash equivalent balance during the same period was only 14.692 billion yuan.

In this context, Wang Jianlin had to start selling assets frequently to get his money back. In addition to selling shares in Wanda Films, since 2023, it has transferred a total of 11 Wanda Plaza, including Beijing Wanda Plaza, where Wanda is headquartered.

On March 30 of this year, Wang Jianlin introduced an investment of about 60 billion yuan from 5 institutions, including Taimeng Investment Group and CITIC Capital, at the cost of about 30% of Wanda Commercial Management's shares. As a result, Wanda Commercial Management's gambling crisis was temporarily resolved, but Wang Jianlin also lost absolute control over Wanda Commercial Management.

“Confucian” expands the film and television landscape

As the new actual controller of Wanda Film, Coliming has rich experience in the film and television industry and capital operation.

Coliming was born in 1983. After graduating from junior high school, he went to Australia to study. In 2006, he obtained a master's degree in money banking from Griffith University in Australia. After that, Coleming chose to return home to work, first working in finance in Hong Kong, and then in Beijing, where he began entering the film and television industry.

Since then, as an investor and producer, Coliming has participated in the filming of TV dramas such as “Frontier of Love”, “No War in Beiping”, “Langyabang”, “The Legend of Qianyue”, and “Let's Fall in Love”, “To Youth: When We Are Still Here”, “Old Boy Raptors Cross the River”, “The Sewing Machine Band”, “Send You a Little Red Flower”, “Hello Li Huanying”, “Exchange Your Life”, and “Stay Safe” TV series.

After becoming famous in the film and television industry, Ke Liming once again picked up his “old business” in the financial industry and began capital operations for his company, Ruyi Pictures, in an attempt to promote it into the capital market.

In 2014, the listed company China Technology Holdings planned to buy Ruyi Film at a consideration price of 1.5 billion yuan, but the deal was eventually halted by the Securities Regulatory Commission. In 2015, Ke Liming made another move and sold 49% of Ruyi Film's shares to Tenshin Entertainment for a consideration of 2.3 billion yuan. However, just 1 year later, Tenjin Entertainment resold the shares to Dayu Assets at a consideration of 1,617 billion yuan.

In 2020, Hengteng Network, a Hong Kong stock listed company owned by China Evergrande Holdings, gave an olive branch to Ruyi Pictures. In October of that year, Hengteng Network acquired Virtual Cinema Entertainment Co., Ltd. (VCEL) for HK$7.2 billion and controlled three companies, Ruyi Pictures, Beijing Jingxiu, and Beijing Xiaoming through VCEL.

Through this acquisition, Hengteng Network has taken the film and TV drama production business under Ruyi Film and the online streaming pumpkin movie, and the company's performance has also increased dramatically. In 2021, Hengteng Network's revenue reached 2,319 billion yuan, up 840.21% year on year, and net profit was 1,175 billion yuan, up 9676.57% year on year.

However, in 2021, after the Evergrande thunderstorm, China Evergrande began to continuously reduce its holdings and sold its shares in Hengteng Network three times to Coliming, Tencent, and United Resources Investment Holdings. In this context, Ke Liming became the company's second-largest shareholder and began serving as the company's chairman. Hengteng Network also changed its name to China's Ruyi the following year.

After acquiring Wanda Films, China's Ruyi will further open up the film and television industry chain.

Compared with film production and distribution, theatrical revenue is the majority of Wanda Film's revenue. Financial reports show that by the end of the first half of 2023, Wanda Film had 708 direct-run cinemas and 149 asset-light cinemas, 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 revenue alone reached 4,042 billion yuan, accounting for 58.84% of total revenue. In addition, product, restaurant sales revenue, and advertising revenue generated around theaters also reached 983 million yuan and 610 million yuan, respectively.

In the 2023 annual report, China's Ruyi also stated that Wanda Film's huge theater network can bring rich audience data, which in turn allows the company to gain insight into market changes and help the film to position itself in the market. Furthermore, through the cinema network, China's Ruyi can also better carry out IP operations and enhance the influence of its own IP.