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December 6, 2012 1:46 pm
The independent chain, the UK’s largest, aims to appeal to a more highbrow, older clientele than mass-market multiplexes, with cinemas in locations such as Clapham and Notting Hill in London, as well as Bath, Henley-on-Thames and Oxford.
The transaction will give Cineworld 21 more sites and it plans to open a further 10 Picturehouse cinemas in locations around the UK.
Picturehouse’s management will remain in place and the business will be run as a separate entity to Cineworld, which operates 80 sites across the UK, of which 77 are multiplexes with five screens or more.
Lyn Goleby, a co-founder of Picturehouse, said the “unique character” of its venues would remain and her team will “continue to bring the widest range of film to customers”.
Picturehouse had sales of £30.3m last year and reported a pre-tax profit of £2.5m. It expects earnings before interest, tax, depreciation and amortisation (ebitda) of £5m for the year to December 31, with a further £1m contributed by the new site openings and operational synergies.
Cineworld has also acquired Picturehouse Entertainment, the distribution arm of Picturehouse.
The deal is being funded by debt and a placing of new Cineworld shares which will raise £16m. Cineworld, which has a market capitalisation of £350m, will acquire £9m worth of freehold assets as a result of the transaction.
Cineworld reported revenues of £348m and ebitda before exceptional items of £63.3m in the year to December 29 2011.
The deal represents the latest move in the long-running consolidation of the UK cinema sector. Three players – Vue, Odeon & UCI, and Cineworld – now control 70 per cent of the market between them.
Stephen Wiener, Cineworld chief executive, said: “This acquisition gives us an opportunity to accelerate our growth by reaching new audiences in a high value and growing part of the market.”
Douglas Jack, Numis analyst, said the deal would increase Cineworld’s exposure to older cinema-goers – the fastest growing demographic group – and pushed his target price for Cineworld shares up to 290p.
Nick Batram, analyst at Peel Hunt, said the deal was a good move for Cineworld as “people of a certain age” will pay a premium to sit in an independent cinema.
“A lot of people don’t want to be rammed into a multiplex where there are lots of young people who are potentially going to be playing around on their mobile phones,” he said.
Cineworld shares rose 1 per cent to 248.9p in morning trading.
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