STV, the Scottish broadcaster, has agreed to sell its Pearl & Dean cinema advertising arm to a company backed by Thomas Anderson, the owner of the Empire Cinemas chain.
Recognisable to many cinema-goers by its pa-pa-pa-pa theme tune, Pearl & Dean Cinemas is being sold for £1 on a cash-free and debt-free basis, although STV said the new owner would also partially repay an inter-company loan held by the unit.
STV announced its intention to find a buyer for Pearl & Dean as long ago as September 2006. It said the unit was the last asset to be sold as part of its strategy of sellling non-core businesses to reduce debt.
Rob Woodward, STV chief executive, said the sale had taken so long because Pearl & Dean was lossmaking and locked into an onerous contract with the Vue cinema chain signed by previous STV management.
Pearl & Dean is currently the second-largest seller of cinema advertising slots in the UK, with just more than a third of the market. Digital Cinema Media, a joint venture between the Odeon and Cineworld cinema chains, is the market leader.
The business, which made a loss of £13.3m in 2009, is being bought by Image Limited, a newly incorporated company backed by Mr Anderson, who is also non-executive chairman of Circle Oil.
As part of the deal, STV said it would recoup £9.1m of an inter-company loan it had extended to Pearl & Dean to cover its obligations to Vue under the ill-fated contract.
It will receive £2.5m on completion and expects to get the rest by January. The proceeds will be used to reduce debt.
The sale is subject to shareholder approval at a general meeting scheduled for May, although the deal already has backing from holders of 11 per cent of its voting shares.
STV shares fell 10.9 per cent to 90p in early morning trading on Wednesday. The group said it continued to see a strong start to 2010 in its core businesses, although it remained cautious about the second half.