Chinas Wanda Seeks Buyers For Australias Hoyts Cinema Chain
© Available from Variety Wanda, the Chinese conglomerate that once threatened to take over Hollywood, has put the Hoyts cinema chain it bought in 2015 up for sale in Australia.
According to Screen Australia 2022 data, Hoyts is the second largest cinema operator in Australia with 46 multiplexes with 412 screens. It is also Val Morgan, Australia's largest film advertising agency.
Wanda Cinema Line, China's largest cinema operator, has appointed Credit Suisse and Nomura to handle sales.
Bidders must have access to a 'secured loan' (an agreed line of financing arranged by the bank) if the prospective purchaser cannot obtain sufficient financing on their own. The initial application deadline is set at the beginning of May, and final applications will be submitted at the end of June.
News of the sale was first reported in The Australian Financial Review, with bankers saying they hoped to value A$1 billion ($670 million) with a private equity firm as a buyer.
Sources close to the Australian company later confirmed the information behind the offer. Wanda did not respond to Variety's request for comment.
The sale was dubbed "Operation Mario" by Hoyts and Bankers, possibly referring to the period of sales when the Super Mario Bros. movie was still on sale. Universal became a standard movie in many countries. In Australia, the film grossed US$15 million (US$10.1 million). in its five-day opening weekend.
Financial documents show how Hoyt's business suffered during the pandemic, but now point to a rapid recovery.
According to the document, annual revenue is expected to reach 638 million Australian dollars (427 million US dollars).
Hoyts was posting losses in 2020, with a deficit of $45 million ($30.2 million) compared to $137 million in 2019. Normalized EBITDA was $111 million in 2021. EBITDA is expected and depreciation to 130 million Australian dollars.
Founded in 1909, Hoyts has a long history of occasional business ups and downs. In 2000, it was the world's seventh largest exhibition company and a public company with overseas operations in the United States and New Zealand before being acquired by Kerry Packer. It was later sold to private equity firm Pacific Equity Partners.
An IPO was considered in 2014, but the group was sold to Chinese entrepreneur Sun Xiuyang and ID Leisure Ventures. ID quickly transferred him to Wanda Cinema Line, part of Dalian Wanda Real Estate and Hotel Group. The Wanda Cinema line has been merged into a Shenzhen registered subsidiary, Wanda Films.
The Wanda Group's move to Hoyts was part of a broader move in theater, film and sports that began with the $2.6 billion purchase of American movie chain AMC in mid-2012.
Wanda's subsequent entertainment ventures included the $3.5 billion acquisition of Legends Entertainment, attempts to purchase minority stakes in several Hollywood studios, the $1.2 billion purchase of sports marketing company Infront, construction of several theme parks across China, and a mega-opening. The production mass-produced the studio in Qingdao, where Matt Damon partially filmed The Great Wall of China.
Wanda's expansion comes to an abrupt halt when a $1 million bid for Dick Clark's American production company is derailed by China's latest rules of currency access and leverage. Wanda Cinema Line's 2017 IPO has been blocked by Chinese regulators. In the past, Wanda was the first of many Chinese real estate giants to implement a forced debt-reduction program.
To reduce debt, Wanda quickly sold theme parks, several hotels, and movie studios, reduced foreign investment in sports, and abandoned plans to open a movie-making headquarters in Beverly Hills.
The Hoyts sale reflects the continuation of a significant liberalization process that has slowed in part due to the impact of COVID. Between March and May 2021, Wanda reduced her stake in AMC to almost zero. And in early 2022, the company sold a minority stake in Legendary to private equity firm Apollo for $760 million.
Wanda previously tried to sell the Hoyts with a $400 million refinancing package by mid-2021. But the timing was unfortunate, as revenue plummeted due to covid and they fell into the redline.
Wanda Films needs something right. It has not yet announced financial terms for 2022, which it is expected to attribute to losses in its late-January report. Annual losses ranged from 1.3-1.95 billion yuan ($191-287 million) in 2021, after a modest profit of 106 million yuan ($15.5 million). Chinese cinemas have been hit by successive waves of government-imposed restrictions and closures since the second quarter. Until mid-December, when Covid restrictions were lifted overnight, resulting in a box office slump. The loss warning indicated that Hoyts' revenue grew 67% year-over-year and returned to profit.
With Wanda Cinema's international ambitions thwarted, the group can be confident it has cemented the position of the Wanda Cinema line in mainland China's theater market, the world's largest by performances and second by gross revenue.
Through capital reduction in 2022, the company said in a recent statement that Wanda was able to increase its share of China's box office market by 1.8 percentage points to 17.1%. It has 704 live cinema complexes with 6,110 screens and 141 other theaters with 1,002 screens.
"As the supply of domestic and foreign content continues to grow, the demand and desire to watch movies at home and abroad is expected to continue to grow, and the prosperity of the entire industry should also improve," Wanda said.
For Australian investors, we hope the feeling is mutual.
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