Dalian Wanda Group Co.’s partial exit comes as Chinese regulators have aimed to limit Chinese companies’ investments abroad. The Beijing-based conglomerate acquired a majority stake in AMC six years ago.
Chinese regulators told some of the state-owned banks in June of last year that Wanda’s overseas deals didn’t comply with its restrictions.
AMC chief executive Adam Aron said in an interview Friday that China’s push to get Chinese companies to invest at home rather than abroad made AMC investors worried that “Wanda might decide to sell a lot of shares in the market quickly.”
“We never thought they would do anything that would harm AMC’s public shareholders, but we’ve been living this nagging concern about overhang for 15 months,” Mr. Aron said.
In 2017, shares of AMC declined 55%. Year to date, they have climbed 35%. Friday afternoon, shares were up 1.5% to $20.40.
AMC said Friday that Silver Lake invested $600 million into AMC in convertible notes. AMC said it spent about $421 million of those proceeds to buy back about 24.1 million of Wanda’s Class B shares. Wanda now owns about half of AMC.
B. Riley FBR senior analyst Eric Wold said in a note Friday that news of Wanda downsizing its stake was positive for a number of reasons, including reducing concern that Wanda would sell its shares. He also said he “wouldn’t be surprised” if more Chinese companies with overseas investments sold stakes in public companies.
Earlier this year, Chinese company HNA Group Co. exited an investment in U.S.-based Hilton Worldwide Holdings Inc. that had been valued at more than $6 billion.
According to AMC’s Mr. Aron, Wanda has told AMC that its sale of the theater company’s shares satisfies Wanda’s cash needs and that Wanda expects to keep AMC shares for a “considerable time.”
AMC will use $160 million of the proceeds to pay its Class A and Class B shareholders a special dividend of $1.55 a share.
As part of the deal with Silver Lake, the private-equity firm also would get a seat on AMC’s board, which will be filled by managing director Lee Wittlinger. AMC said that it will also choose a new independent director “with support” from Silver Lake.
The deal is in the form of unsecured convertible notes, AMC said. The notes will be due in 2024.
Those notes are able to convert to Class A shares at $20.50, or $18.95 following the special dividend. Assuming a full conversion of the notes, Wanda would own 38% of AMC shares, AMC said. It added that Silver Lake “generally” has to wait a year before converting the notes.
Source: Wall Street Journal By Allison Prang
