ENTERTAINMENT: Wanda Plays Up Govt Ties In Sports Buy
Bottom line: Wanda is sending a bad signal by emphasizing its government ties in its latest overseas mega-purchase, reflecting the complex relationship between major Chinese firms and Beijing.
If big Chinese companies are trying to show their independence from Beijing, then property giant Dalian Wanda isn’t doing a very good job with its just-announced $1.2 billion purchase of a major European sports marketing firm. The mega purchase of Swiss firm Infront Sports & Media is certainly a major feat, but Wanda has made a questionable decision in focusing on the how the deal will help Beijing’s bid to win more major sporting events, including the 2022 Winter Olympics. Of course I’m being just a tad cynical here, but this kind of talk certainly won’t help Wanda and other major private Chinese companies convince western skeptics of their independence from Beijing.
Truth be told, just about any major Chinese company — be it state-owned or private — has large teams of people dedicated to maintaining smooth relations with Beijing and local government officials. Such relations are critical to doing business in this bureaucratic country, where backing of key officials is important since many rules are often murky and large gray areas exist in the law. Wanda is a particularly special case, since its core business is in the sensitive real estate sector and the company reportedly once had close ties with now-disgraced former government rising star Bo Xilai.
Thus Wanda and its colorful chief Wang Jianlin need to be careful as they embark on major business expansions both at home and increasingly abroad. Wang is looking to expand outside his original real estate focus into the leisure and entertainment business, which appears to be the main motivating factor behind his newly announced purchase of a controlling stake in Infront.
Under the deal, Wanda will pay 1.05 billion euros for 68.2 percent of Infront, which focuses on obtaining broadcasting rights for major sporting events like the soccer World Cup and some Winter Olympic events. (English article) Three other unidentified Chinese and global investors will take the remaining stake in a firm that generated some 800 million in revenue last year.
All that looks fine and good, and certainly seems in line with other recent entertainment purchases that Wanda has made in the last 2 years, including a 45 million euro investment in Spanish football club Atletico Madrid announced just a few weeks ago. But what caught my attention was one media report that quoted Wang saying the Infront deal will allow Wanda “to actively support China in its bidding efforts for major sports events.”
That kind of statement doesn’t require too much interpretation, and paints a less attractive picture of Wanda as a sort of marketing arm of Beijing. Of course Wang Jianlin probably made that particular statement because his investment will inevitably require a number of Chinese government approvals, and he wants to show how the deal will benefit not only Wanda but also China. Still, I doubt many western leaders will look too favorably on that kind of characterization of this purchase.
The issue of ties between Beijing and China’s major companies has become a point of concern for western governments that are wary of such ties, and believe that big Chinese firms may have other motivations than purely business when they move overseas. The classic case is networking equipment maker Huawei, which was banned from selling to all US companies due to Washington’s suspicion about its ties to Beijing.
So far Wanda has steered clear of that kind of controversy, mostly because it operates in less sensitive areas than Huawei. One of the company’s other big overseas purchases came back in 2012, when it bought AMC Entertainment (NYSE: AMC), the second largest US movie theater operator, which it later listed on the New York Stock Exchange. If I were advising Wang, I would tell him to tone down the rhetoric about his government connections in future deals, or risk alarming local politicians who could ultimately try to thwart his efforts.
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