Onex, Oaktree in blockbuster C$2bn Loews sale

A private equity group consisting of Bain Capital, The Carlyle Group and Spectrum Equity Investors has agreed to buy the world’s third-largest cinema chain.

Canadian financial conglomerate Onex Corporation and Los Angeles-based private investment firm Oaktree Capital Management have agreed to sell their stake in Loews Cineplex Entertainment to a US-based private equity consortium for C$2 billion ($1.5 billion, €1.2 billion).

Boston-based Bain Capital is teaming with Washington, DC-based The Carlyle Group and Boston- and Menlo Park, California-based Spectrum Equity Investors to buy the world’s third largest movie theater chain. The private equity group will acquire Loews’ operations in the US, Grupo Cinemex, and its 50 percent interests in Megabox Cineplex of Korea and Yelmo Cineplex of Spain.

According to a statement, Toronto-based Onex and Oaktree will retain the Loews interest in Cineplex Galaxy, which operates the Loews theatre business in Canada as well as Galaxy Entertainment and trades on the Toronto Stock Exchange. Onex’s share of the cash proceeds will be approximately C$775 million.

Loews, founded a century ago, has more than 200 theatres and 2,200 screens worldwide. Onex and Oaktree bought Loews in March 2002 when the global cinema chain emerged from bankruptcy at a time when the global motion picture exhibition industry was having difficulties with expansion and financial problems. Since then, the sun has come up for the cinema operator market; as part of Loews transformation, the company shut down some theatres, modernised its buildings, restructured its debt and added on three movie theater businesses in the US, Mexico and South Korea.
Credit Suisse First Boston and Citigroup Global Markets advised Loews Cineplex in this transaction, expected to close during the third quarter.

The Bain-led consortium follows March’s agreement by Chicago-based Madison Dearborn Partners to acquire Cinemark from The Cypress Group for $1.5 billion. Cinemark had been a minority investment for Cypress since 1996 when the firm acquired its share in the company in a $139 million buyout. The sale to Madison Dearborn will yield investors a lucrative three times return on investment.