Blackstone-backed Cineworld to IPO

The UK’s second largest chain of cinemas intends to float on the LSE next month with a reported enterprise value of £450m.

UK cinema group Cineworld, a portfolio company of the Blackstone Group, has announced that it plans an initial public offering on the London Stock Exchange in June.

JPMorgan Cazenove and Lehman Brothers are acting as joint global co-ordinators, bookrunners and joint sponsors for the flotation.

A report in today’s Financial Times puts Cineworld’s enterprise value at approximately £450 million (€655 million; $838 million) and said that chief executive Steve Wiener will sell up to 25 percent of his stake in the business. Proceeds from the share sale will be split, with half used to pay down debt and the remainder to acquire shares from Blackstone.

Blackstone is expected to reduce its stake in Cineworld from 90 percent to below 50 percent following the flotation, according to the FT.

US private equity firm Blackstone acquired Cine-UK in October 2004 from a private equity consortium including JP Morgan Partners, RIT Capital Partners and Botts & Co. No price was disclosed at the time, but it is understood that the consideration was around £120 million.

The Cine-UK business was founded in 1995 by a management team headed up by Wiener and currently operates 79 cinemas comprising 820 screens under the Cineworld brand. According to the company, Cineworld accounted for approximately 24 percent of the total number of cinema screens in the UK in January 2006.

The company then acquired UGC’s cinema operations in the UK and Ireland in December 2004, with the merged entity becoming the second largest cinema operator in the UK, according to a statement.

According to a regulatory statement, Cineworld increased revenue by 4.5 percent from £260.4 million in 2004 to £272.2 million in 2005, and EBITDA by 17 percent from 37.6 million to £44 million in the same period.

The two other largest cinema chains in the UK, Odeon UCI and Vue Entertainment, are also in the hands of private equity firms. Terra Firma Capital Partners paid around £400 million for Odeon and €270 million for the UK and European network of UCI Cinemas in August 2004 before merging the two businesses as Odeon UCI, the UK’s largest cinema operator. Earlier in 2004, BC Partners and Legal and General Ventures formed Vue Entertainment from the merger of Village and SBC International.