China’s Historic Hollywood Play: 5 Things To Know About Dalian Wanda Maybe Buying Legendary Entertainment

LOS ANGELES — China's long-awaited Hollywood studio deal looks to have finally happened. And with that, several dominoes — or mahjongg tiles — could fall soon, on both sides of the Pacific. Late Monday, Reuters reported that China's Dalian Wanda Group has agreed to acquire a majority stake in Legendary Entertainment in a deal valuing the company between $3 billion and $4 billion, which would be the first time a Chinese company will control a Hollywood studio.

Legendary is the studio behind hits such as "The Dark Knight" and "Jurassic World," which was the opening-weekend box-office record holder in most of the world until it was upstaged by "Star Wars: The Force Awakens." The dinosaur blockbuster reeled in almost $100 million when it opened in China last summer.

So with Dalian Wanda, which also owns American cinema chain AMC Theaters, making the long-speculated Chinese studio buy, here are five questions about the deal — and some of its potential consequences:

Why Legendary?

Its slate of action-packed and superhero-driven films, such as "The Dark Knight" and "Jurassic World," have done very well at the Chinese box office. Legendary also has a co-production agreement with China Film Co., China's biggest filmmaker, which certainly helps get its films screened in the country's theaters, especially given the quota for Western movies. Only 34 foreign films are permitted in Chinese cinemas every year.

There's also the fact that Dalian Wanda's Wanda Cinema Line Corp., China's biggest chain, and AMC Theaters have invested significantly in supersized Imax screens. Legendary's suite of products seems to be a good fit for the premium format, which is more profitable for cinema operators.

Who's the next Chinese buyer?

Alibaba Pictures, the homegrown film production arm of Chinese e-commerce behemoth Alibaba Group, recently set up an office in suburban Los Angeles. But founder Jack Ma looks to be building a media empire that ranges from newspapers to online video to movies — and he has floated interest in the American film industry. Alibaba seems as good a bet as any to be the next to take the reins of a Hollywood studio.

What's the next studio that could be under Chinese ownership?

Dalian Wanda has flirted with Lions Gate Entertainment Corp., the independent studio behind the "Hunger Games" franchise. And with Lions Gate's stock up nearly 100 percent since the start of 2013, it could be a decent time to take some money off the table. Alibaba already has a joint streaming service with Lions Gate; it's certainly possible the Legendary deal could rekindle other discussions.

Could the teetering Chinese stock market kill the deal?

Highly unlikely. While several Dalian Wanda companies are publicly traded, the parent firm has plenty of cash and an aggressive acquisition strategy to deploy it. It's also run by China's richest man, Wang Jianlin. China had stock market turmoil last year, and both Dalian Wanda and Alibaba made plenty of deals.

What’s next for Dalian Wanda?

Dalian Wanda has diversified the sources of its revenue in recent years, buying AMC Theaters and an Australian cinema chain, and investing in real estate projects such as a luxury condo tower in Beverly Hills.

The company is also building what's likely the world's biggest movie studio, spanning more than 400 acres and including a replica of a New York City street. It's counting on international production companies, not just Chinese firms, to film there. One way to bring more international production to that project is to invest in it, and given the company's aggressiveness in scooping up movie theaters, it wouldn't be too surprising if there were more studio deals to come from Dalian Wanda. But even if that particular company is done for now, El Niño probably won't be the only wave sweeping through Tinseltown from the other side of the Pacific this year.