CINEMA chain Cineworld landed itself a role as a “major player” in the global market yesterday with a £500 million takeover of a European rival.
The proposed shares and cash deal for Cinema City will give it leading positions in Bulgaria, Czech Republic, Hungary, Israel, Poland, Romania and Slovakia.
Anthony Bloom, chairman of Aim-quoted Cineworld, said: “This is an exciting and unique opportunity for Cineworld to offer shareholders enhanced growth prospects and attractive returns via exposure to some of the most promising cinema markets in Europe. Cinema City is an extremely well-run and dynamic business, which creates a platform for further growth in future.”
The deal will see Cineworld pay £272m and offer Cinema City’s owners a 25 per cent stake in the combined business. The cash element will be funded by debt and a £110m rights issue.
Bloom will remain in the chair but the new company will be run by current Cinema City chief executive Mooky Greidinger, as Cineworld founder Steve Wiener recently announced his intention to step down as chief executive.
Wiener, a former Warner Bros Europe managing director who founded Cineworld in 1995, said in October that he would leave the firm in March to “enjoy the fruits of his success”.
Greidinger’s family started the predecessor to Cinema City in 1929 when it opened its first cinema in Haifa, in modern-day Israel, in 1931.
Israel was Cinema City’s sole country of operation until 1997, when the company expanded into central and eastern Europe with the launch of operations in Hungary.
Greidinger said: “After nearly four decades in the cinema industry building a business from one country to seven, I see an impressive company in Cineworld and a good fit with Cinema City. Together with the rest of the proposed management team I intend to seize this opportunity to bring together two equals in size, both leading players in their respective countries, and lead the resulting business to continuing growth, innovation and dedication to the best possible customer experience.”
The merged group will have 201 outlets and 1,852 screens across Europe, with the addition of 966 from Cinema City making it the second largest operator in Europe behind Odeon UCI, which has more than 2,100 screens.
Analyst Wayne Brown, at Canaccord Genuity, said the enlarged company would have global clout, while the deal would be earnings enhancing for shareholders from the start.
He said: “At first glance this deal should be seen as positive and highlights the ambition of the group.
“Cineworld will now be a major player in the global Cinema market and this alone, coupled with the exciting growth opportunities provided by Cinema City, deserves a re-appraisal of our target price. We increase this to 500p.”
Douglas Jack, at Numis, was more cautious.
“Our initial view is that the transaction has strategic sense, but whether or not it can enhance what was already an attractive organic growth story is in question,” he said.