Bank of Scotland backs £350m one-stop buyout of UK cinema chain

The Scottish bank’s integrated finance arm has taken a minority stake in Vue Entertainment, the cinema group, providing both debt and equity in its biggest deal yet

Bank of Scotland Corporate’s integrated finance team has backed the management of Vue Entertainment, a UK developer and operator of cinemas, in a buyout worth about £350 million (€510 million; $645 million) its biggest deal to date.

The bank has taken a minority stake, providing an exit for the chain’s previous investors Boston Ventures, Clarity Partners, two US private equity firms, and Legal & General Ventures, the buyout arm of the UK insurer. An adviser close to the deal said the buyout firms made an IRR of about 20% and and money multiple of close to two times the original investment.

The US funds are thought to have enjoyed an additional benefit from currency excahnge rates.

Vue’s management team has taken a 51% controlling stake in the new buyout.

Simultaneously, Vue is also acquiring five new Village Roadshow-branded multiplex cinemas in the UK. Four new sites are due to open later this year in the UK, following Vue’s acquisition of the Ster Century cinema chain in May last year. An additional 10 new state-of-the-art multiplexes are planned over the next 2 to 3 years.

During the past 2 years Vue’s market share of the UK and Irish box office has increased to over 20%. It has 55 cinemas with 544 screens and 126,351 seats which attract over 30 million customers per annum.

Private equity firms own two other of the UK’s largest cinema operators. Cineworld is owned by US buyout firm the Blackstone Group, while Guy Hands’s Terra Firma owns Odeon.

Blackstone last week postponed Cineworld’s planned £450m flotation, citing adverse market conditions.