Property Week - September 9, 2009
Investor could buy 16 outlets after usurping bidders with property-only offer
Delancey has emerged as THE frontrunner to buy a £100m-plus package of up to 16 cinemas from US media mogul Sumner Redstone’s National Amusements.
Bidders were lined up for the auction of Redstone’s UK cinemas in April when Citi was appointed as adviser to sell its property and operating assets in the UK.
Several cinema operators bid for the portfolio, including Cineworld and Israel Theaters, Israel’s largest cinema group.
But it is thought that Delancey made a bid directly to National Amusements offering to enter into a property-only transaction.
The deal would involve Delancey buying the freehold properties owned by National Amusements and leasing them back to the company, allowing it to remain in the UK and raise money through a property sale rather than an outright sale of the business.
Both parties have entered an exclusivity agreement.
The total UK assets of National Amusements were valued at more than $500m 18 months ago and total 21 cinemas – including 16 freehold venues. Experts suggest the price under discussion for the sale and leaseback could exceed £100m, reflecting a yield of around 8%.
National Amusements trades as Showcase Cinemas in the UK. This includes its high-end cinema operation Cinema de Lux, which it opened last year in Derby, Bristol and Leicester (above). National Amusements owns these three cinemas on a leasehold basis.
It was to open a fourth venue at Westfield London but, following its difficulties in the US, the plan was scrapped. Rival operator Vue has now signed up at the mall.
It is thought Redstone is selling the cinema chain to help pay down a $1.6bn debt pile and avoid having to sell shares in Viacom, the owner of cable channels MTV and CBS.
National Amusements breached banking covenants last October, but struck an agreement with lenders that involved the sale of some of its cinemas.
The cinema sector has performed well in 2009. Operators such as Cineworld have reported good trade and predict the second half of 2009 will improve further.
None of the parties would comment on the cinema transaction.
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