Odeon Cinemas for Sale for £1Billion

Guy Hands, chairman of Terra Firma reveals the plan to start the Odeon cinema sale process before 2016. Hands said that the private equity group will be that the sale will push through by the end of 2015.

Terra Firma will likely appoint banks to handle the process. Possible buyers include owners of South American cinemas, US cinema groups and private equity companies from the US, Europe or China. Another option is to go for a stock market listing even though the asset might lack the right scale for this type of deal.

Previous Attempt to Sell

In 2013, Terra Firma placed Odeon and UCI, market-leading cinema operator in Britain, on the block. But the sale did not materialize and the process was abandoned because the bids did not even reach the £1.2Billion valuation. There was another attempt to market the cinemas but the efforts proved unsuccessful. During that time, the buyer worked with Goldman Sachs and JP Morgan, who recommended waiting for improvement in business.

The Bidders

Terra Firma may transfer the cinema to US firms like Cinemark, Regal Entertainment. Odeon might even be bought by Grupo Severiano Ribeiro from Brazil. Grupo operates under Kinoplex brand. Some even think that UCI and Odeon cinema might capture the attention of Vue Entertainment, a UK company. Vue is owned by Alberta Investment Management Corporation and OMERS Private Equity, Canadian investors.

Another buyer could be China’s Dalian Wanda. Earlier this year, Dalian purchased Infront Sports and Media AG, a Swiss sports marketing business. Dalian is moving into the entertainment industry and earlier reports came out that it had shown interest in acquiring Odeon.

London Stock Exchange - PriceGuideLady.co.ukLondon Stock Exchange

Another option is to have the cinema chain listed in London stock exchange. Odeon is best known for the ill-fated £2.4Billion takeover of EMI, a record company. The deal happened in 2007.

The cinema’s profits before tax, interest and other charges for the year 2013 decreased by 24 percent to £69.2m on a 5 percent slowdown in company sales to £706.7Million. Since then, profits failed to increase. Thus, Terra Firma had no other recourse but to place the cinema for sale to the highest bidder.

Odeon cinema was founded in 1930. Terra Firma bought it in 2004 for €650Million Euros. In the same year, UCI was bought for €350Million. Terra refinanced UCI and Odeon in 2011. The two cinemas operate 2,182 movie outlets in 237 locations in Ireland, UK, Germany, Italy, Austria, Germany and Spain, where it is under the Cinesa brand.

The cinema market in UK is dominated by three companies, Vue, Odeon and Cineworld, the only one that’s listed in London Stock Exchange. These cinemas account for approximately 70 percent of UK’s screens. Doughty Hanson, another private equity firm, sold Vue in June 2013. The cinema was acquired for £935Million by 2 Canadian pension funds.

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