I wonder what they'll be selling? All the smaller older theaters, leaving behind all cinemas few people will want? Or will they have to sell some Silver City-style, large-scale cinemas? Anyone know which specific ones are being sold? I would think Rainbow Cinemas will want to buy some of the nicer ones. Some of the more urban ones might be bought up by Alliance Atlantis, and the bigger ones might be bought up by AMC, I would think.
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Cineplex buys Famous Players
By TAVIA GRANT
Monday, June 13, 2005 Updated at 1:58 PM EDT
Globe and Mail Update
Cineplex Galaxy LP said it agreed to buy the Famous Players unit from Viacom Inc. for $500-million, combining Canada's two largest movie-theatre companies.
As part of the transaction, Cineplex Galaxy will comply with a Competition Bureau stipulation that the company sell 35 theatres with annual box office revenues of almost $100-million.
Last fall, New York-based Viacom said it planned to sell its Famous Players arm in Canada, the largest movie exhibitor in this country with a market share of about 40 per cent. For months, industry observers have seen Cineplex, with a 31-per-cent share, as a top contender for the unit.
“Working in conjunction with Onex Corp., our largest unit holder and controlling partner, we are bringing together two great companies and are creating an exceptional opportunity to build value through an improved cost structure and expanded product offerings,” said Ellis Jacob, president and chief executive of Cineplex Galaxy.
Cineplex Galaxy Income Fund holds about 42 per cent of Cineplex Galaxy LP, while Toronto-based leveraged buyout firm Onex and other shareholders hold the balance. Onex currently owns 31 per cent of the outstanding income trust units and has a 100 per cent voting interest.
Famous Players operates at 81 locations with 787 screens across the country, including theatres in its joint ventures with Imax Corp. and its partnership with Alliance Atlantis. Cineplex Galaxy operates or has an interest in 86 theatres with 775 screens across Canada in six provinces.
Canada's competition bureau gave a green light for the move, provided Cineplex sell some theatres. The theatres to be divested are in Victoria, Vancouver, Calgary, Edmonton, Lethbridge, Saskatoon, Winnipeg, London, St. Catharine's, Kitchener, Hamilton, Kingston, Ottawa, Toronto, Gatineau, Montreal and Quebec City.
“Our goal is to ensure that consumers continue to benefit from competitive prices and choice in the exhibition of first run motion pictures,” said Gaston Jorré, Senior Deputy Commissioner of Competition.
The move will leave Cineplex with 132 theatres in Canada. Remaining competitors in the movie-theatre landscape include AMC Theatres, based in Kansas City, Missouri, and the Rainbow/Magic Lantern movie chain.
The transaction, which includes about $36-million in capital lease obligations, is expected to close in the third quarter, subject to conditions.
Cineplex Galaxy plans to finance the transaction through a combination of debt and equity. Scotia Bank, RBC Capital Markets and National Bank Financial have provided commitments to finance the purchase price, the company said.
Last year, Famous Players had sales of $520-million while Cineplex Galaxy had sales of $354-million. Theatre level cash flow for the theatres to be divested was about $13-million last year.
“The Cineplex Galaxy management team has excelled in integrating businesses in the past and expects to realize significant operating synergies and improved EBITDA (earnings before interest, depreciation and amortization) from the combined companies as a result of this transaction,” said Mr. Jacob.
The companies hold a conference call to discuss the transaction at 11 a.m. EDT.
Units of Cineplex Galaxy Income Fund were unchanged at $14.20 in early trading in Toronto. Onex rose 7 cents to $19.22.