Warner deal beckons for LGV

Legal & General Ventures is planning to lead a £250m bid for the Warner Village cinema chain as the sector continues to attract private equity interest.

Legal & General Ventures (LGV), the private equity unit of the UK insurance and financial services group, is set to extend private equity interest in the cinema sector with a £250m offer for the Warner Village cinema chain.


LGV, headed by Adrian Johnson, is planning to acquire the chain through Spean Bridge, a small independent cinema chain based in Scotland and part-owned by US venture firm Boston Ventures. LGV and California-based private equity firm Clarity Partners, which specialises in communications, media and related technology companies, would each take a stake in Spean, which would then launch a takeover of Warner Village. According to The Times newspaper, the three firms are planning to offer around £250m for the chain, which will include more than £100m of debt.


Warner is a joint venture between Warner Brothers and Village Roadshow, the Australian cinema group. Warner Village has 36 sites in Britain and has a 16 per cent market share.


Interest in the cinema industry is being driven by steady increases in audience figures, which are at their highest level for over thirty years. In January 2003, admissions reached 16.3m, an average of 3.67m per week and eight per cent up on 2002 levels. The Cinema Advertising Association expects full year admissions to reach 182m for 2003.


Last week, WestLB agreed to pay £431m to acquire the Odeon cinema chain from Cinven. Vivendi is also planning to sell its UGC Cinema chain, with private equity firms including PAI Management among the likely buyers.


LGV, which has not been available for comment, has been active in the leisure and entertainment section in the past twelve months. The firm acquired French casino operator Moliflor Loisirs for over E400m last March, a month which also saw the completion alongside Cinven Group and Princes Gate Investors of the E3.2bn acquisition of the Unique and Voyager pub chains.


LGV invests from its annual private equity partnership. Commitments to the partnerships expire at the end of each year and each partner then decides how much it may wish to commit to the next year's fund. Legal and General Assurance Society is a cornerstone investor in each fund. A number of external partners, including a broad base of financial institutions and pension funds, commit to these annual partnerships.


In November 2002, LGV announced the final closing of its latest fund, LGV 3 Private Equity Limited Partnership, ahead of its E250m target. The fund will be invested in the period up to the end of 2003.