China’s Wanda Seeks Buyers for Australia’s Hoyts Cinema Chain

Patrick Frater
Updated ·5 min read

Wanda, the Chinese conglomerate that once threatened to take over Hollywood, has put up for sale the Hoyts cinema chain in Australia that it bought in 2015.

Hoyts is Australia’s second largest movie theater operator with 46 multiplexes housing 412 screens, according to 2022 data from Screen Australia. It also owns Val Morgan, Australia’s biggest cinema advertising firm.

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Wanda Cinema Line, itself China’s biggest theater operator, has appointed Credit Suisse and Nomura to handle the sale.

Bidders are understood to have access to a “stapled debt” package (a line of agreed financing arranged by the banks) if the potential buyer cannot arrange sufficient finance of their own. A first deadline for bids is set at the beginning of May, with final offers to be submitted by the end of June.

News of the sale process was first reported by the Australian Financial Review, which reported that the bankers are hoping for a A$1 billion ($670 million) valuation with a private equity firm as the most likely purchaser.

Sources close to the Australian company have since corroborated the information behind the offer. Wanda did not respond to Variety’s requests for comment.

The sales process has been called ‘Operation Mario’ by Hoyts and the bankers, possibly a reference to the timing of the sale, as Universal’s “The Super Mario Bros. Movie” delivers record-breaking performances in many territories. In Australia, the film bounced to a five-day opening weekend of A$15 million ($10.1 million).

Financial documents show just how badly Hoyts’ business suffered during the pandemic, but suggest it is now making a strong recovery.

Group revenues fell from A$593 million ($397 million) in 2019 to A$211 million ($141 million) in 2020, before recovering to A$335 million ($225 million) in 2021 and A$550 million ($369 million) in 2022, according to the documents. Revenues in the current year are forecast to hit A$638 million ($427 million).

Hoyts fell into loss in 2020, recording a deficit of A$45 million ($30.2 million), compared with A$137 million in 2019. Normalized earnings before interest taxation and depreciation were A$111 million in 2021. EBITDA is forecast to reach A$130 million.

Founded in 1909, Hoyts has had a long history of periodic corporate upheavals. By 2000, it was the world’s seventh largest exhibition firm and a public company with overseas operations in the U.S. and New Zealand, before being acquired by Kerry Packer. Later, it was sold to private equity firm Pacific Equity Partners.

An IPO was mooted in 2014, but instead the group was sold to Chinese businessman Sun Xishuang and his ID Leisure Ventures. ID quickly flipped it on to Wanda Cinema Line, part of the Dalian Wanda property and hotels group. Wanda Cinema Line was later reconsolidated within Wanda’s Shenzhen-listed Wanda Film subsidiary.

The move on Hoyts by the Wanda group was part of a fast-paced charge into cinemas, filmmaking and sports that kicked off with the mid-2012 purchase for $2.6 billion of leading U.S. cinema chain AMC.
Wanda’s subsequent moves in entertainment included the $3.5 billion purchase of Legendary Entertainment, attempts to buy minority stakes in several Hollywood studios, the $1.2 billion purchase of sports marketing firm Infront, the building of multiple theme parks across China and the high-profile opening of huge production studios in Qingdao, where Matt Damon-starring “The Great Wall” was partially shot.

Wanda’s expansion came to an abrupt halt when its $1 billion bid for American company Dick Clark Productions was thwarted by newly-imposed Chinese rules on access to foreign exchange and debt ratios. A 2017 flotation of Wanda Cinema Line was blocked by Chinese regulators. With hindsight, Wanda was only the first of many Chinese property giants put on an enforced debt reduction program.

To cut borrowings, Wanda quickly sold off the theme parks, some hotels and the film studios, slashed its overseas sports investments and abandoned plans to establish its movie industry HQ in Beverly Hills.

The Hoyts sale reflects the continuation of a great unwinding process that was partly slowed by the impact of COVID. Wanda trimmed its holdings in AMC close to zero between March and May 2021. 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 Hoyts in mid-2021 along with an A$400 million debt refinancing program. But as the COVID-depressed revenues and dip into the red show, the timing was lousy.

Wanda Film could do with something going right. It still hasn’t been able to publish its 2022 financial statement and a late January filing forecast a plunge back into losses. Annual losses were predicted in the RMB1.3 – 1.95 billion ($191-$287 million) range, following modest profits of RMB106 million ($15.5 million) in 2021. China’s cinemas suffered rolling waves of restrictions and government-mandated closures from the second quarter of the year until mid-December when, overnight, COVID restrictions were jettisoned, causing box office revenues to collapse. The loss warning noted that Hoyts had enjoyed a 67% year-on-year revenue improvement and had returned to profitability.

While Wanda’s international movie ambitions now lie in tatters, the group can take some comfort in having consolidated Wanda Cinema Line’s position in the mainland Chinese theatrical market, the world’s largest by screen count and the second largest by gross revenue.

Moreover, at the same time as slashing capital expenditure in 2022, Wanda was able to grow its China box office market share by 1.8 percentage points to reach 17.1%, the company said in a recent filing. It directly owns 704 cinema complexes with 6,110 screens and it manages a further 141 venues with 1,002 screens.

“With the continuous increase of domestic and foreign content supply, it is expected that the demand and willingness to watch movies at home and abroad will continue to increase, and the prosperity of the whole industry is expected to improve,” Wanda said.

It’ll need to hope that for investors in Australia, the feeling is mutual.

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