June 10, 2013 8:02 pm

Vue has eyes for cinema rival Odeon after Canadian takeover

Pedestrians pass through a shopping mall housing a Vue Cinemas complex on Upper Street in central London, UK©Bloomberg

The chief executive of Vue Entertainment has revealed that the UK cinema chain is interested in bidding for its bigger rival Odeon & UCI among other potential acquisitions under its new Canadian owners.

Tim Richards, who founded Vue in 2003 and retains a minority stake in the group, said: “We’d be very interested in having a look at Odeon.”

UK-based private equity investor Doughty Hanson on Monday sold Vue for £935m to two of Canada’s largest pension funds – Omers Private Equity and Alberta Investment Management.

The UK cinema market is dominated by three groups – Vue, Odeon and Cineworld – which together own about seven in every 10 screens.

While any deal between the groups would trigger competition concerns, a person close to Vue said these could be dealt with by acquiring only part of Odeon’s portfolio and selling the remaining assets.

Vue wants to buy Odeon cinemas in areas of the UK where it lacks a presence as well as its rival’s screens in countries such as Germany, Austria, Italy, Spain and Portugal, the person said.

Mark Redman, senior managing director at Omers Private Equity, said he was ready to support Vue’s expansion through acquisitions. Omers teamed up with Alberta to ensure the company would have the firepower for deals, he said.

“We could have done the deal on our own, but there was an M&A opportunity going forward and we wanted the business to be able to have the firepower,” he said.

When asked specifically about Odeon as a potential target for Vue, Mr Redman said: “Odeon is the largest operator in the UK. The pan European market is a lot less consolidated than the UK market. That’s where the opportunities are for Vue.” He did not elaborate further.

Terra Firma, the private equity group that bought Odeon in 2004, last month appointed JPMorgan and Goldman Sachs to explore options for a sale of the company at an enterprise value of more than £1bn, according to a person familiar with the talks.

Potential bidders include Dalian Wanda, a Chinese property conglomerate that last year acquired the US cinema chain AMC for $2.6bn, and BC Partners, a private equity group that has previously shown interest in Odeon.

A flotation or an auction of Odeon, which owns 236 cinemas, is likely to start after the summer, according to a person with knowledge of the matter.

Vue has doubled the number of cinemas under its ownership from 70 to 146 over the past three years, through acquisitions of three European chains – the UK’s Apollo Cinemas, Germany’s Cinemaxx and Poland’s Multikino.

Among the portfolio are two of the UK’s three top-grossing multiplex cinemas – at Westfield shopping developments in London’s Shepherd’s Bush and Stratford. Vue also operates in Germany, Ireland, Denmark, Portugal and Taiwan.

Vue’s earnings before interest, tax, depreciation and amortisation were about £110m last year, according to a person close to the company.

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