De-mystifying China’s Outbound FDI

On the occasion of the first “1+1” Zurich session, Prof. Dr. Zhang Hua lectured on forei

On the occasion of the first “1+1” Zurich session, Prof. Dr. Zhang Hua lectured on foreign domestic investments, referencing the „Dalian Wanda“ case. Dalian Wanda purchased the U.S. film studio, ‘Legendary Entertainment’ last year, which represented a historic new step in the entertainment market for the Chinese Real Estate giant. Owner of the Dalian Wanda Group is China`s wealthiest man, Wang Jianlin. The group is one of the biggest private companies in the world.

 


Why would a Chinese real estate company wish to buy an American entertainment company? One reason is that for Chinese companies, globalization really means upgrading their capabilities domestically. Prof. Zhang explained that most of the Chinese companies going abroad have one motivating factor in common: they are not seeking new markets, but rather new resources and capabilities.  Ultimately their goal is to upgrade their own capabilities and learn from western firms, so that they can better compete in the Chinese domestic market.  At the end of the day, the goal of such acquisitions is to bring the best of both worlds together, and design a “win-win” transaction structure which bridges cultures and sustains the business long-term, Prof. Zhang said.

In the case of AMC, Dalian Wanda turned the entertainment company around.  On August 31, 2012 Wanda bought AMC for 700 Mio USD.  AMC owned 343 theaters with a total of 5000 screens, which accounted for 20% of the US box offices.

2004 AMC was acquired by a group, which included JP Morgan, Bain and others for 1.5 Bio USD.  
2010 An IPO resulted in 1.5 Bio USD
2010 AMC rejected Wanda`s initial offer of 1.2 Bio USD
2012 AMC had 3.6 B in debt.
2012 Wanda was Chinas biggest cinema company and bought AMC for only 700 Mio USD.

Prof. Dr. Zhang Hua

Dr. Hua Zhang is Associate Professor of Finance at CEIBS. Dr. Zhang received his Ph.D. in Economics from the School of Economics, University of Hong Kong. He holds M.A. and B.A. degrees from Fudan University, both in economics.

His current research interests are corporate finance, corporate governance and business ethics, entrepreneurship, and financial economics. His research papers have been published in Journal of Business Venturing, Journal of International Business Studies, Journal of Business Ethics, Corporate Governance: An International Review, as well as other academic journals and newspapers.

 

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