PE firms tempted by cinema deals

As WestLB closes the purchase of Cinven’s Odeon cinema chain, a group of French private equity firms are lining up bids for Vivendi’s UGC cinema network.

German investment bank WestLB has confirmed that it is to buy UK cinema chain Odeon from private equity house Cinven in a transaction worth £430.6m.


Acting via its principal finance unit that is headed by Robin Saunders, WestLB is joined in making the offer by a consortium comprising Entertainment Film Group, the UK-based independent film distribution company and private property group Rotch.


Odeon, Britain’s largest cinema operator, has 75 sites nationwide, including its flagship cinema at Leicester Square in London and employs approximately 4,300 people. The ABC chain, which consists of 57 sites and employs 1,300 people, also operates under the Odeon brand. Last year, Cinven completed a refinancing of Odeon, securitising a £300m bond issue against cash flows generated from ticket sales.


Odeon achieved turnover last year of £212m and operating profits of £46m. Its assets have a total freehold value of around £300m.


Cinven director Richard Munton described the deal as a successful exit for the private equity firm. Cinven, advised on the sale by UBS Warburg and Morgan Stanley, indicated that it had doubled its money in the three years it has held Odeon.


The purchase of Odeon is the first major deal to be completed by WestLB after it emerged last month that the German bank had agreed to supply Saunders with E3bn to make acquisitions across Europe. WestLB is also planning to make a public offer for AWG, the holding company of Anglian Water.


Meanwhile, Vivendi looks set to continue last year’s sale of assets with the disposal of UGC Cinemas. A sale is likely to be announced within the next couple of months. According to French business daily L’Agefi, Vivendi is being advised on a sale by Clinvest, a unit of Credit Lyonnais, with private equity firms as the most likely buyers.


Vivendi is looking to secure between E400m and E500m for its 55 per cent holding in the business, which has just under 900 screens and had over 60 million customers through its doors last year. PAI, CDC Ixis Equity Capital, Morgan Stanley Private Equity and LBO France are thought the most likely bidders, although Apax Partners, Eurazeo, Legal & General Ventures and Permira are also said to be examining the business.


The Verrecchia family, which holds the balance of UGC, has first option on Vivendi’s stake. Offers for the business have so far ranged between E250m and E450m.