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China-backed AMC to buy Odeon from Terra Firma

The Guy Hands-led firm is offloading the cinema chain in a £921m deal after a 12-year hold.

Undeterred by Brexit, US cinema chain AMC Theatres, which is backed by Chinese conglomerate Dalian Wanda, has agreed to acquire Odeon and UCI Cinemas Group from Terra Firma Capital Partners.

The deal values the businesses at around £921 million (€1.1 billion; $1.22 billion), which comprises £500 million in equity – 75 percent in cash and 25 percent in stock consideration – and the assumption of £407 million of net debt, according to a statement from Terra Firma.

The transaction, which is subject to regulatory approval, is set to complete in the fourth quarter of 2016.

Terra Firma founder Guy Hands said the firm was “delighted” to realise its investment in Odeon and UCI after a 12-year hold period, during which more than £600 million was invested to grow the business and deliver the firm’s “long-term transformational strategy”.

Terra Firma acquired Odeon in 2004 for €650 million, and later merged it with UCI, which it bought for €350 million in the same year. The firm tried to sell the cinema chain in 2011, but instead completed a £475 million refinancing.

“Under Terra Firma, the number of Odeon and UCI screens increased from 1,453 in 2004 to 2,236 today, and the business has emerged as Europe’s leading cinema operator,” Hands said. “We are confident that under AMC’s ownership, Odeon and UCI will continue to grow and thrive.”

Terra Firma declined to comment on the return the sale would generate for investors in the €2.1 billion Terra Firma Capital Partners II.

In a statement, AMC chief executive officer and president Adam Aron called the transaction a “once-in-a-generation opportunity to acquire Europe’s leading cinema chain and create the world’s biggest and best theatre operator”.

“While we acknowledge that there are some uncertainties related to Brexit, we are encouraged that current currency rates are highly favourable to AMC with the pound falling to a three decade low versus the dollar,” he said. “In total, we believe this transaction will generate long-term value for our guests, our studio partners and our shareholders.”

Following the transaction, the combined company will operate 627 theatres in eight countries. AMC is also looking to acquire US theatre exhibitor Carmike Cinemas, the statement said.

The transaction has fully committed debt financing in place arranged by Citi Global Markets, with targeted leverage in the near-term of around 4x adjusted EBITDA.

Last month Terra Firma dropped its lawsuit against Citigroup, in which the firm claimed it was pushed into buying record company EMI in 2007, drawing a line under a years-long battle. Terra Firma was seeking to win back the £1.6 billion the ill-fated investment cost LPs in its second and third funds.