- AMC is America’s second biggest theater chain
- Dalian Wanda Group, who are based in Beijing, said headquarters will remain in Kansas City and 18,500 employees will keep their jobs
- Chinese investment set to create more 3-D and IMAX cinemas in U.S.
PUBLISHED: 09:22 EST, 21 May 2012 | UPDATED: 10:36 EST, 21 May 2012
The second-largest U.S. movie theater chain has been bought by a Chinese company today in a historic takeover.
AMC Entertainment Holdings was sold for $2.6 billion to Dalian Wanda Group Company in a setback to President Obama’s attempts to prevent American businesses being eclipsed by their Chinese rivals.
Wanda said the deal would create the world’s biggest movie theater operator and the Beijing-based company revealed it would invest an additional $500 million in AMC’s development.
AMC operates 346 cinemas, mostly in the United States and Canada, and has 23 of the 50 highest-grossing U.S. outlets.
The multi-billion dollar deal undermines President Obama’s promises to re-stimulate the economy at home. Following his State of the Union address in January, Obama told a manufacturing plant in Iowa: ‘We need to make it easier for American businesses to do business here in America.’
In February, the President urged Congress to adopt tax proposals that reward technology companies and other businesses that create jobs in the U.S. rather than overseas.
He said: ‘Companies… are realizing that even when we can’t make things cheaper than China, we can make things better. That’s how we’re going to compete globally.’
At a signing ceremony for the deal in Beijing today, Wanda chairman Wang Jianlin said: ‘We support AMC becoming bigger, not only in the United States but in the global market.’
There has been increased Chinese investment in U.S. corporate assets despite disputes between the two governments over trade and political issues, such as this month’s diplomatic standoff over a blind Chinese legal activist Chen Guangcheng who arrived in New York on Saturday.
The AMC deal is the largest-ever takeover of a U.S. company by a Chinese company. In terms of all Chinese corporate investments in the U.S., the deal is the third largest, according to financial research firm Dealogic.
It ranks behind investments by Beijing’s sovereign wealth fund, the China Investment Corp., of
$5 billion for a minority stake in Morgan Stanley and $3 billion in Blackstone Group LP, both in 2007.
Chinese companies had invested $34.8 billion in the United States by the end of 2011 in industries including auto parts, agriculture and steelmaking, according to data compiled by economist Derek Scissors at the Heritage Foundation, Washington.
MOVIE MAGIC: THE HUMBLE BEGINNINGS OF AMC
The company began in 1920 when three brothers Maurice, Edward and Barney Dubinsky purchased the Regent Theater in Kansas City, Missouri.
After changing the family name, it became known as Durwood Theaters which grew into a chain across Kansas City.
The company designed the first multiplex theater in the world in 1963. Five years later, the multi-screen had expanded nationwide and became American Multi-Cinema (AMC).
AMC introduced other firsts – the armchair cup holder and stadium seating.
It is the second-largest movie chain in the U.S. after the Regal Entertainment Group. AMC has 346 locations and 18,500 staff.
Globally, outbound mergers and acquisitions by Chinese companies total $16.8 billion so far this year, up 6 per cent from the same period last year.
Wanda said AMC’s headquarters will remain in the Kansas City area and day-to-day operations will not change.
AMC’s management would remain in place and staff numbers were not expected to be affected. The company employs some 18,500 people.
Wanda, founded in 1988 and privately owned, operates hotels, department stores, tourism and other businesses and reported a 2011 revenue of $16.7 billion. The company employs 50,000 people and its assets include 86 theaters in China.
AMC’s owners include Apollo Global Management, Bain Capital, the Carlyle Group, CCMP Capital Advisors and Spectrum Equity Investors.
AMC has reported losses for the past three years but iCEO Gerry Lopez said it has returned to profit this year due to strong ticket sales.
Mr Wang, the Wanda chairman, said AMC’s financial problems were due to the cost of servicing high debt. He said conditions should improve once an injection of Wanda’s cash allows it to pay off some of that.
He said: ‘We are confident that after the merger, AMC will turn positive. We have absolute confidence in the future of the company.’
Wanda’s investment will allow AMC to speed up renovation of some cinemas and install more 3-D and IMAX technology, Lopez said.
Wang and Lopez said the two companies plan to share experience in the film business and will have executives from each country visit the other. Lopez said they have not made detailed plans about such things as a possible exchange of staff.
Lopez is to join the board of directors of Wanda’s cinema unit, while a Wanda executive will join AMC’s board, Wang said.
Wang said Wanda was considering more acquisitions abroad for its entertainment, hotel and retail units. He said it might try to buy into a global hotel brand or a hotel management company but gave no details.
‘We want to be a big company, not just in China but in the world,’ he said.