Wanda challenges the Mouse

China's in-flight network milestones

Wang Jianlin, chairman of Wanda Group, recently sat down for an interview with China Central Television and said he bets the Shanghai Disney Resort, which is scheduled to open on June 16, will not make any profit in the next 20 years due to the existence of Wanda. Here are edited excerpts of that interview.

What do you think of the Shanghai Disney Resort?

First, we have to admit that Disney is a global entertainment business, especially in the amusement industry. Disney has opened six theme parks around the world, attracting a total of about 130 million visits a year, which makes it the biggest tourism enterprise globally. There is no doubt that it's an excellent company. As for Shanghai Disney Resort, however, I bet it won't make any profit in the next 10 to 20 years.

As an outdoor amusement park, Disney has an advantage: a great amount of international properties. But it can also be a burden, as Disney has been expanding based on international property rather than exploring new products or business models.

The weather in Shanghai is not good for an outdoor park, as it rains a lot during the summer and gets cold in winter. In addition, it's not an era in which people are crazy for Mickey Mouse or Donald Duck. It doesn't work if they just copy from the past.

The high cost is also a problem. It took $5.5 million to build Shanghai Disney, which I can't understand. I think they have to keep a high price strategy to make up for the high cost, which will lose customers.

Disney shouldn't have come to the Chinese mainland, because Wanda is here. We believe a tiger is no fighting match for a group of wolves. There is only one Disneyland, in Shanghai, but Wanda has almost 20 amusement parks nationwide, and the number is still growing. Wanda's amusement parks are totally different from Disney's. Ours are innovating continuously, combining indoor and outdoor projects. So I don't see a Disneyland on the mainland as promising, at least not in finance.

Why did Wanda delist? Why go private?

It's hard to understand for many people in the international and the domestic capital market why Wanda would delist to privatize just 18 months after going public in Hong Kong, which they would think cost more than going public in the first place. Why? I'll give two core reasons.

One is that the company was substantially undervalued. The price-earnings ratio of Wanda's Hong Kong shares was just 5, making a market value even lower than our net assets, which is unacceptable. I felt sorry for my friends and shareholders because of the undervaluation.

The other reason is that the privatization this time has created a new model globally. Anyone who sees Wanda as promising is welcomed to join. This is different from the traditional type of privatizations, in which major shareholders usually take control.

So, Wanda's core competence is its wealth?

That was more of a joke when I said so in a speech at Harvard. Talking about wealth, how can Wanda be richer than state-owned companies? Some overseas investment banks think Wanda has caused huge finance burdens with its continuous mergers and acquisitions. Actually, they're wrong. All out M&As share a similar characteristic: they capitalize successfully and earn the money back in one or two years, instead of expanding debts.

Even if Wanda has been in debt after an acquisition, it's temporary and transitional. When Wanda starts to plan a merger, we think over the goals, how we do business, how we make a profit, and what kind of business model we choose from the very beginning, and through private listing or issuing new shares after it goes public, we dilute the costs.

The highest state of business is to run without paying?

I said this inside our company or to a small group of people several years ago. "Karate" is the highest level of business, which means you don't have to invest money but earn. But the karate should be based on an absolute strength and brand.

Disney is playing karate, which expands with franchising with its brand around the world without paying money. McDonald's and KFC are doing similar things.

Wanda has built its brand in the leisure industry. We bought Legendary Pictures, and did a private listing two months ago, raising 15.8 billion yuan ($2.4 billion; 2.15 billion euros), which was more than the purchasing cost. So Wanda will keep making such purchases in the future.

Of course, it's not easy to get to this status, which is based on a good reputation, brand influence and trust from people for a long time.