Further consolidation in the UK cinema industry could be imminent with the new Canadian owners of the Vue chain saying they will push for organic and acquisitive growth.
Quoted in the Financial Times this morning, Vue chief executive Tim Richards said: “We’d be very interested in having a look at Odeon.”
Toronto-based Omers Private Equity (OPE) and Alberta Investment Management (AIMCo) have agreed to buy Vue Entertainment, which operates 146 cinemas including c80 in the UK, from current owner Doughty Hanson for £935m.
Under the deal, due to be completed in July or August, Vue’s management team including Richards will continue to run the business and will retain a substantial stake.
The company was bought for £450m in 2010 and its expansion has included Apollo Cinemas last May, plus Germany’s second largest cinema chain CinemaxX, and Poland’s Multikino last month.
Richards said: “We are delighted to be embarking on the next phase of our journey with OPE and AIMCo, who share our vision of driving attractive growth and investment returns by consistently delivering an excellent entertainment experience for our customers.
“As the company moves forward, I am confident that we will do so from a position of real strength. We will continue to build on this success by innovating, enhancing and growing the business through our continuing plan for organic growth supplemented by strategic acquisitions.”
Mark Redman, senior managing director & head of Europe at OPE, said: “We are very pleased to be working with Tim Richards, one of the leading industry executives, and his team at Vue to support the business in its next phase of development.
“This is a best-in-class business featuring a first rate management team. This substantial bilateral off-market transaction demonstrates OPE’s ability to deliver for discerning vendors. We are also delighted to be partnering with a like-minded similarly-sized $70bn institution such as AIMCo. Our combined ownership gives Vue the distinct advantage of patient capital and deep pockets for organic and acquisitive growth.”
Vue operates more than 1,300 screens across 146 multiplex cinemas in the UK, Ireland, Germany, Denmark, Portugal, Poland, Lithuania, Latvia and Taiwan.
Leading analyst Wayne Brown of Canaccord Genuity said the sale means speculation around the sale of Odeon and the strategic rationale for further M&A, on both a Pan-European and UK basis, “will certainly increase”.
“However the price paid may represent a ceiling for scalable cinema assets due to what we view as a premium asset in Vue.
“We do not see any immediate impact for Cineworld as this sale is likely to result in further European M&A as opposed to any additional competition within the UK.
“However it is likely to raise questions as to whether Cineworld has M&A ambitions in Europe or is solely concentrated on its domestic market. We await the conclusion from the Competition Commission investigation into the proposed acquisition of Picturehouse [by Cineworld].”
Brown estimated that the price represents 9-9.5x EBITDA versus 8x EBITDA at Cineworld’s currently trading price.
