Blackstone this week created the country’s second-biggest cinema chain with the acquisition of the UK and Irish assets of French cinema group UGC.
The US private equity group paid £200m for UGC, which operates 408 screens in 42 cinemas.
In September, Blackstone acquired Cine-UK – which has 37 cinemas with just under 400 screens – for about £120m.
Andrew McGregor, head of leisure at FPDSavills, said the purchase could come under investigation by the Office of Fair Trading (OFT).
Terra Firma’s purchase in August of Odeon for £400m and UCI for £186m, creating the UK’s biggest cinema chain, is already being investigated by the OFT.
He added that the two deals would undoubtedly increase the strength of each operator’s covenant, which could lead to even greater investor interest in the market.
Cinemas are attractive because they have property asset-backing, stable cash flows and a diverse customer base.
“This year has been unprecedented in terms of corporate activity in the cinema market,” McGregor said.
“There has been a reasonably steady growth in terms of admissions in the UK cinema market and Blackstone will see it as an opportunity to bring two parties together and achieve economies of scale, trimming back on cost and driving up margins. Like any venture capital business, it will work the business to its limits for five years before looking for an exit.”
Lehman Brothers advised Blackstone. Barclays Capital provided the debt financing.
References: EGi News 03/12/04
