Park life: Chinese investors target theme parks

Wang Jianlin’s ambitions in the theme park space are clear. The founder and chairman of Dalian Wanda Group wants to take the fight to Shanghai Disneyland, saying that The Walt Disney Company’s one “tiger” in China won’t be able to compete with his “pack of wolves.” Wanda launched the first of 15 planned theme parks last May, a month before the $5.5 billion Shanghai Disneyland opened its doors. 

With Comcast-owned Universal Studios breaking ground on a $7 billion theme park in Beijing last October and DreamWorks Animation working with CMC Capital Partners and Lan Kwai Fong Group on an entertainment complex in Shanghai, the industry is becoming crowded with big names. According to local media, 21 theme parks opened in China in 2015 and 20 more were under construction. It is unclear how broadly the definition of theme park stretches.

SeaWorld could be added to that list in due course. Last week, The Blackstone Group agreed to sell its remaining 21% stake in the company to China-based Zhonghong Zhuoye Group for about $449 million. As part of the deal, SeaWorld will advise Zhonghong on the concept development and design of theme parks, water parks and family entertainment centers to be built in China, Taiwan, Hong Kong and Macau. The president of Zhonghong’s US operation put it bluntly: SeaWorld would be coming to China.

Wanda inevitably attracts the most attention among the domestic players, for its deals as much as for its flamboyant founder. The company wants to become a service-oriented business covering four key industries: commercial property, culture, financial services, and e-commerce. In addition to developing theme parks, Wanda has established itself as the world’s largest cinema chain operator, and bought a Hollywood production house (Legendary Entertainment), an international sports event (the Ironman series), and a sports marketing business (Infront Sports & Media).

This is clearly a real estate-plus strategy: culture, financial services and e-commerce are essentially enablers for property development. Think of content – underpinned by sport or entertainment – driving consumers to theme parks surrounding by luxury hotels and to multiplex cinemas sitting at the heart of shopping malls. It is all about staying relevant as lifestyles evolve, and there is every reason to believe Wanda might become more creative in its investments as it looks further into the future.

The company is not alone among real estate developers in pursuing diversification – Zhonghong appears to be doing much the same. The company’s listed subsidiary, Zhonghong Holding, generates the bulk of its revenue from property, but has interests spanning tourism and leisure, including hotels, resorts and theme parks. As of 2015, it was planning to invest nearly RMB15 billion ($2.2 billion) in two projects in Hainan and Zhejiang provinces incorporating resorts and entertainment as well as residential real estate.

Zhonghong made its mark internationally in 2016 with the acquisition of luxury tour operator Abercrombie & Kent from Fortress Investment Group. The company’s name also came up in the context of PAG Asia Capital’s $3.2 billion bid for DreamWorks, which was trumped by Comcast. It emerged in legal disclosures (from an indirectly related case) that PAG held preliminary discussions with Zhonghong before approaching DreamWorks, presumably with a view to monetizing the brand in China.

Theme parks represent one aspect of China’s broader push into the media value chain. Whether driven by corporates or private equity – CMC is the best example of the latter, having created a dedicated platform for long-hold assets such as theme parks – these investments are ultimately intended to leverage the Chinese consumer. The question for buyers, particularly those in highly competitive segments, is how soon they need these bets to start paying off.

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• Topics
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• China